Weakness is about Iran, but not just Iran

Briefing.com Summary:

*Worries about the Iran conflict lasting longer than expected have fostered a risk-off disposition.

*Market participants continue to contend with worries about AI disruption and private credit loan exposure.

*Inflation angst has contributed to rising Treasury yields and fading rate cut expectations.

Yesterday, oil prices rose sharply, Treasury yields jumped, and the equity futures signaled a noticeably lower start, as market participants reacted to the weekend news that the U.S. and Israel had launched a joint strike on Iran. There was a risk-off disposition and nervousness in the air.

Session lows were hit at the open. The S&P 500 was down 1.2%. However, the focal point for most of the day was how quick the market was to buy the dip because it did not think/fear this combat operation with Iran would last long, nor would there be a lasting choke point through the Strait of Hormuz for energy supplies.

The S&P 500 finished the session flat, and the Nasdaq Composite managed a 0.4% gain after being down 1.6%.

Well, market participants will have the chance to do it all over again today. WTI crude futures are up 7.3% to $76.41/bbl, the 2-yr note yield is up six basis points to 3.55%, the 10-yr note yield is up five basis points to 4.10%, and the equity futures are signaling a noticeably lower start.

Currently, the S&P 500 futures are down 123 points and are trading 1.8% below fair value, the Nasdaq 100 futures are down 542 points and are trading 2.2% below fair value, and the Dow Jones Industrial Average futures are down 889 points and are trading 1.8% below fair value.

The word on the street is that the market is nervous this conflict with Iran might go on longer than feared. That would be bad for a lot of reasons, but the economically concerning issue at hand is the spike in energy costs, which has persisted after Iran declared that it will fire on any vessel trying to get through the Strait of Hormuz.

The higher energy costs are fueling inflation concerns, pushing out rate cut expectations for some and increasing rate hike possibilities for others, while also raising earnings concerns that stem from higher operating costs and a potential slowdown in consumer spending.

Foreign markets have gotten a taste of these concerns. Major bourses in Europe are down 3-4%; Japan’s Nikkei dropped 3.1%; and South Korea’s Kospi plunged 7.2%.

It will be a sharply lower open for the U.S., but the initial losses won’t be as bad as those seen abroad. Everyone will be waiting to see if the same buy-the-dip mentality wins out again today or if the indices adhere to the risk-off demeanor throughout the session.

The Iran situation is clearly the market’s main preoccupation, and rightly so, but there are other matters of interest.

Target (TGT) and Best Buy (BBY) are both trading higher following their earnings reports. MongoDB (MDB), on the other hand, is not. It is down 27% after providing some disappointing Q1 guidance that featured a deceleration for its Atlas business.

The offshoot of this is that the software disruption theme is back in play, which is further weighing on sentiment, along with reports that Blackstone (BX) saw $1.7 billion in net outflows for its flagship private credit fund.

Accordingly, today’s weakness isn’t just about the new concerns surrounding Iran; it is also about the lingering concerns pertaining to AI disruption and private credit loan exposure. The result, for now anyway, will be a sharply lower open.

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Originally Posted March 3, 2026 – Weakness is about Iran, but not just Iran