100 days of the Iran war: How global markets and the economy have been affected, in charts

After 100 days of conflict, the Middle East war is still driving cross-asset volatility, with Brent crude about 36% above pre-war levels and WTI up almost 50%. U.S. inflation has re-accelerated, with CPI at 3.8% in April, while U.S. Treasury yields have surged and the 30-year hit its highest level since before the Financial Crisis. Equities have mostly looked through the war, with the S&P 500 at all-time highs, but elevated energy costs, supply disruptions and a potential Strait of Hormuz shutdown continue to pose macro risk.

Analysis

The market is treating a medium-duration energy shock as if it were a short-lived headline event. That is creating a bifurcation: AI-heavy U.S. and parts of Asia can keep levitating as long as capex expectations remain intact, while rate-sensitive, energy-importing regions are absorbing a slower, more corrosive hit through margins and discount rates. The second-order effect is that even without a broad equity de-rating, leadership should narrow further into a handful of cash-generative growth franchises and away from cyclicals, consumer discretionary, and Europe-exposed industrials.

The more important transmission is not spot oil; it is the persistence of higher inflation expectations into wage bargaining and term premia. If higher energy costs linger for another 1-2 quarters, central banks will be boxed in: they cannot credibly ease into a renewed inflation impulse, but they also cannot tighten aggressively without worsening growth. That setup is bearish for long-duration government bonds and for credit spreads, especially lower-quality issuers that depend on stable refinancing conditions.

The contrarian miss is that market calm may be less about confidence and more about forced participation and index concentration. If a small subset of AI winners is masking deterioration elsewhere, the tape can stay resilient until breadth breaks abruptly. The cleanest reversal trigger is either a rapid reopening of shipping routes, which would unwind inflation hedges and crush energy beta, or a renewed move toward $100+ oil, which would likely flip positioning from apathy to de-risking within days.

From a competitive-dynamics lens, U.S. oil exporters and refiners are quietly gaining share from disrupted imports, while Asian chip and infrastructure names benefit from secular capex even as their input costs rise. That mix favors relative-value expressions over outright equity beta, because the macro regime is no longer uniform: some sectors are getting a growth upgrade at the same time others are entering a margin squeeze. The opportunity is to own the winners of scarcity and capex intensity while fading the sectors most exposed to sticky inflation and weaker end-demand.

Key Decisions for Investors

• Long XLE / short XLY for 4-8 weeks: energy retains inflation protection while consumer discretionary is most vulnerable to persistent fuel and financing pressure; target 8-12% relative outperformance if oil stays elevated.
• Long SMH or SOXX vs short IWM on a 1-3 month horizon: AI capex leadership should keep semis supported even if the broader economy slows; use a stop if real yields fall sharply on dovish central-bank repricing.
• Short IEF or TLT via puts for the next 1-2 months: elevated term premia and sticky inflation expectations argue for continued Treasury pressure; best risk/reward if 30-year yields retest recent highs.
• Own upside convexity in crude through Brent call spreads or USO calls into any headline about the Strait of Hormuz remaining constrained; use 1-2 month tenor because the move is event-driven and can gap quickly.
• Underweight European equities versus U.S. large cap growth through a pair trade (e.g., long SPY / short VGK) for the next quarter: Europe has the weakest earnings sensitivity to energy input inflation and the highest macro beta to the shock.