Things you need to know
- US stocks bucked the trend on Monday, but Tuesday is a different story.
- The conflict grows, US embassy in Riyadh gets hit.
- Is the Strait of Hormuz closed? Oil is spiking.
- Amazon data center suffers indirect damage.
- Qatar and UAE trying to find a diplomatic solution.
- Bonds down, gold down, dollar UP.
- US Primaries begin today adding yet another layer of uncertainty.
- Try the Eggs In Purgatory.
Global markets came under pressure Monday morning as investors got their first chance to react to the weekend drama. Futures were sharply lower, fear was elevated, and at one point the Dow was down more than 600 points. But by the closing bell? A very different story.
The Dow finished down just 73 points — which, given the intraday action, actually felt like a win. The S&P managed to eke out a 3-point gain, the Nasdaq climbed 80, the Russell added 25, and the Transports rose 70. Meanwhile, the Equal Weight S&P slipped 17, while the Mag 7 added 131 points.
Contrast that with Europe, where markets never recovered — closing down more than 2% across the board. That was the first real divergence. The U.S. absorbed the shock. Europe didn’t.
So how do you connect the dots?
The early selling in the U.S. was pure fear — algos reacting to the weekend headlines and escalation risk. The afternoon bounce? Classic buy-the-dip behavior, suggesting the conflict would end quickly. But that rebound may have been just a bit premature.
This story is still developing. Overnight, reports surfaced that Iran “closed” the Strait of Hormuz. I say “closed” because there’s real confusion about what that actually means — is it a formal blockade, sporadic interference, are there mines in the water or is it just rhetoric? The State Dept says that the Strait is open for business – But markets aren’t waiting for clarity. Tankers are NOT moving thru the Strait, in fact – nothing is moving thru the Strait. Oil is surging on this headline – up 6.7% on top of the 6% move yesterday. Shipping rates are jumping. Insurance costs are spiking. Recall, yesterday I told you that the Strait is the ‘critical chokepoint’, so no one should be surprised.
At the same time, Iran shut down internet access domestically — leaving citizens in the dark, unable to communicate with the world and they launched strikes hitting the U.S. embassy in Riyadh along with other targets in neighboring countries. That puts Washington in a position where the response changes. The pressure to respond increases. Yesterday, Secretary of State – Marco Rubio – made it clear – ‘we have objectives to meet and we will meet them, the next phase of this conflict will inflict even more pain on the Iranian regime’, so buckle up because this might just drag on a bit longer than originally planned.
Meanwhile, Qatar and the UAE are reportedly working behind the scenes to find an off-ramp — because no one in the region wants a full-scale disruption of energy flows nor do they want a full-scale war unfolding on their shores.
So, what does it all mean? It means volatility isn’t going away. Yesterday the VIX rose 8%. This morning it’s up another 25% — back to levels last seen in November and that raises the risk for stocks.
European markets are getting hit again this morning — down more than 3.5% across the board. Italy and Spain are down 4.3%, Germany off 3.8%, the Euro Stoxx down 3.5%, France lower by 2.8%, and the UK down 2.7%.
U.S. futures? Getting whacked. At 6 am – Dow futures down 800 points. S&P futures off 125. Nasdaq down 570 and the Russell dropped by 73. And while some will call it a Risk Off day – remember – sellers are Risk Off, the buyers are Risk On – but the buyers are letting the sellers drive the action – thus the Risk Off headline. Buyers are happy to buy stocks at lower prices and if the sellers want out, that’s what happens. Prices decline.
And then we are hearing that Amazon is reporting damage (not direct hits) to ‘data centers’ in both the UAE and Bahrain and that is enough to shift the conversation again. Because here’s the bigger question: Could data centers become targets? Because if they are, that’s a new level of escalation. We’re not talking about oil pipelines or shipping lanes anymore. We’re talking about digital infrastructure — the backbone of cloud services, financial systems, government networks, AI workloads, payment systems, logistics platforms — everything. Remember – Data centers are the modern economic infrastructure.
If markets begin to believe those are vulnerable in conflict zones then so much more changes… risk premiums change. Insurance costs change. Redundancy planning changes. Capex shifts. Valuation multiples adjust — especially in tech.
That’s why this morning feels heavier. This isn’t just about oil anymore.
Market participants are trying to price geopolitical escalation before we know the endgame. Yesterday’s afternoon bounce suggested investors believe this conflict was going to be contained and over quick. Asian and European weakness yesterday and today along with weakness in US futures are suggesting ‘no so fast’….
Oil – as noted is up $5.5 – trading at $76.80. We are now well out of what we defined as the trading zone…..And until there’s clarity on the Strait of Hormuz, oil becomes the barometer. If energy stabilizes, we could see markets quiet down, if crude keeps ripping higher, the “premature dip-buying” narrative gets tested quickly.
And now add in the Mid-Term anxiety.
Conversations around the ‘inflation impact’ are now the focus – expect to hear a lot more about this aspect in the coming days, expect the Democrats to latch onto what higher oil prices means for gasoline, food and transportation costs – especially as we are entering the mid-term ‘primary’ season that begins today.
Texas, North Carolina and Arkansas kick the season off today! Now, the Democrats are expected to retake the House, the markets are pricing that in. But the focus is squarely on their ability to take the Senate. If Democrats flip the Senate in 2026 volatility will rise as markets adjust to a new balance of power and try to handicap what it means for regulation, spending, and fiscal policy. Uncertainty around taxes, oversight, and executive authority would increase — and when policy uncertainty rises, multiples tend to compress until there’s clarity. Remember – the markets hate uncertainty.
We will also see sharper sector rotation as investors try to identify the winners and losers under a new regime — healthcare, energy, defense, tech — all trading on shifting expectations. None of that screams panic. But it does mean more noise, more dispersion, and a market that demands discipline rather than emotion.
And so – get ready, because this IS a theme for 2026 and while politics don’t price stocks in the long term, it can create lots of short-term volatility and that creates angst and opportunities for the savvy investor.
Now the prediction markets suggest that Republicans still hold the edge in Senate control – 57% vs. ~42% for Democrats, but the Democrats’ chances aren’t trivial. The betting lines are tight enough to say the outcome is competitive, not locked in, thus the angst. Republicans are favored, but Democrats are within striking distance and that’s enough to keep political risk elevated and markets on edge.
Gold surged yesterday on the geopolitical headlines — classic safe-haven bid. But this morning it’s under pressure. Why? Because money is flowing into the ‘other’ safe haven — the U.S. dollar. And remember the relationship — it’s inverse. Stronger dollar? Weaker commodity prices. Weaker dollar? Stronger commodity prices.
Yesterday the dollar exploded higher — ripping up and through key resistance trendlines. This morning it’s up again. The DXY is trading at 99.26 — now up 3.8% off the January low and up 1.6% in just two sessions. And remember – Gold has skyrocketed – it was up 30% by late January – and this is on top of the dramatic moves in 2024 & 2025.
Technically, the next key level for the dollar is 100.57. A push up and thru will most likely see another leg higher — and that would likely mean continued pressure on precious metals and the broader commodity complex. So yes — gold’s move up yesterday made sense – based on the conflict. But if the dollar keeps strengthening, Gold may have a tougher time sustaining that rally.
Bonds came under pressure yesterday – the TLT and TLH down 1.3% and 1.6% respectively and that sent yields higher. The 10 yr is now yielding 4.10% – up from 3.96% last week while the 30 yr is yielding 4.72% up from 4.64%. So now you ask – bonds should have been bought yesterday in another safe haven play and while you are correct, here is the skinny.
Bonds got sold yesterday not because investors weren’t nervous — but because the inflation trade overwhelmed the safe-haven trade. Normally, geopolitical tension sends money into Treasuries. But with oil surging sharply and the Strait of Hormuz in question, markets immediately began pricing higher inflation risk. Rising energy costs feed directly into CPI expectations, and when inflation expectations rise, yields tend to follow. Add in a stronger dollar and the potential for increased government spending or Treasury issuance if the conflict escalates, and bonds found themselves under pressure. It was the classic ‘inflation scare’ trade.
And this is what investors need to remember: Markets hate uncertainty and you should not be making emotional decisions and nor should you be making erratic decisions.
The S&P closed at 6,881 – up 3 pts – Intermediate trendline support at 6835 is about to get blasted – Long term trendline support is at 6,565.
The tone this morning is decidedly negative and concerns are building; you should not be surprised…. We have been discussing this for months now. I suspect – a test of the long term trendline is now in sight…..If we go there, it would be a 6.5% pullback off the S&P high -a move that is well within a ‘normal’ trading range. Yes, some individual names will get hit harder, (and some already have) but the good names that get hit will be the ones you want to buy when this settles down.
This is the time you need to make sure you are properly diversified –
Call me at 561-931-0190. Let’s talk about whether the risk in your portfolio actually matches your tolerance — because this works both ways. You may be taking too much risk… or not enough to reach your goals.
Take good care,
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Eggs in Purgatory
Purgatory describes a state of temporary suffering, uncertainty, or suspension — not good, not terrible — just stuck and that’s what it feels like – so much of the world is in purgatory. So, try this Sicilian classic.
Fresh marinara sauce – basic….olive oil, onions, garlic, plum tomatoes, fresh basil, s&p and a pinch of sugar…Sauté the garlic and then add the chopped/diced onions….cook for 15 mins or so…now add the crushed plum tomatoes, season with s&p, fresh basil and a pinch of sugar – bring to a boil and then turn down to simmer….cover and let simmer for 30 mins or so…..This is just a very basic marinara – I also add grated carrots and celery – but you can do as you wish….
Now you need a loaf of fresh Italian bread and Eggs.
After you make the Marinara sauce – transfer some into a shallow frying pan…. turn heat to med and now crack open some eggs……drop them in the sauce – whole – as if you are poaching…. with a spoon – move the sauce over the eggs so that they cook – do NOT let the yolk get hard…you want the whites to cook and the yolk to remain soft…….transfer to a plate, cover with more marinara and serve with fresh bread…. Go on…just try it!
Buon Appetito.