How the Iran War Is Affecting the Markets

The war in Iran has obviously dominated financial markets. As a markets reporter, I'm particularly interested in how the conflict is playing out in stocks, in bonds, and in particular in the oil price. If we take a look at a chart of Brent crude, that's the international benchmark, and we can see these sharp increases each day as investors have become concerned about the supply of oil leaving the Middle East. And this week, oil prices moved above anything. we've seen in roughly two years. The Iran war is inflationary. It raises the price of oil. Oil is an input cost for nearly every company that is making anything because energy costs are derived primarily from the price of oil. Therefore, we would expect this to kind of flow through into the stock market. If we look at the S&P 500 here, we've seen an eb and flow largely with uh expectations of how long this war will last. On Monday, we initially sold off, but as the day progressed, investors started to do what we call buying the dip. But then this war has continued and as investors expectations for the length of the war with Iran have increased. We've seen further sell-offs. We saw this on Tuesday with the market dropping quite substantially. And we've seen it again on Thursday and again today with the market falling. Now, obviously, the S&P 500 is important, but actually this week, arguably more important, has been the bond market. US government bonds are vital to global markets. They underpin borrowing costs across consumer and corporate debt. So your mortgage rate is directly tied to the 10-year Treasury yield. We see these sharp increases in yield over the course of the week. It was below 4% before the invasion in Iran. On Thursday, it's up above 4.1%. That has been largely because of inflation expectations increasing. If this war is prolonged, the Federal Reserve will need to keep interest rates elevated to put the brakes on the economy and slow that inflation down. This will not be good news to the administration. The war in Iran would seem to be cutting against the administration's agenda of affordability. So, while the moves in financial markets this week have been perhaps disconcerting, they've still not been enough to derail the economy or really create widespread anxiety over the path of the economy ahead. But that changes the longer this war goes

Our business reporter Joe Rennison walks us through three charts to help make sense of the wild swings in the markets this week since the attacks on Iran commenced. Video by Joe Rennison, Sutton Raphael, James Surdam and Thomas Vollkommer Read the story here: https://nyti.ms/3MRlJMe Subscribe: http://bit.ly/U8Ys7n More from The New York Times Video: http://nytimes.com/video ---------- Whether it's reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, New York Times video journalists provide a revealing and unforgettable view of the world. It's all the news that's fit to watch.