Markets will fly once Iran war ends, says strategist, as oil holds over $100

An end to the month-long U.S.-Iran conflict could unleash a significant market rally, according to strategist Adam Lampe, but crude oil prices holding above $100 a barrel continue to pressure the global economy.

Financial markets will “fly” once the U.S.-Iran conflict resolves, a strategist said Friday, as the war’s inflationary shock pushed the S&P 500 to its worst quarterly loss in four years and holds Brent crude above $100 a barrel.

"History's in our favor when it comes to mid-term year volatility," said Adam Lampe on Friday, though he noted the conflict and crude oil's spike add significant pressure to markets.

The war, which began February 28, has sent Brent crude from around $70 to as high as $119 a barrel, its first time over $100 since 2022. The S&P 500 fell 4.6% in the first quarter, its worst performance since 2022, while the 10-year Treasury yield surged from 3.97% to as high as 4.44% on inflation fears.

The conflict’s duration is the key variable for investors, with a prolonged standoff at the Strait of Hormuz threatening to keep energy prices elevated, further complicating the Federal Reserve's path on interest rates and potentially tipping the economy toward recession.

Oil Shock Fuels Inflation Fears

The primary transmission mechanism for the conflict's economic impact has been energy prices. Iran’s control over the Strait of Hormuz, a chokepoint for a fifth of the world’s oil supply, has introduced a significant risk premium into the market. Brent crude, the global benchmark, has seen dramatic intraday swings, reflecting alternating hopes and fears over the war's timeline.

The surge has been felt directly by consumers and businesses. The average U.S. price for a gallon of gasoline topped $4 for the first time since 2022, according to AAA. Diesel, crucial for freight and logistics, has seen a more pronounced jump, rising from $3.76 a gallon before the war to $5.45. This surge acts as a direct tax on consumers and a cost increase for nearly all transported goods, feeding into broader inflation.

“Americans (are) spending hundreds of millions of dollars more on gasoline every day,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

Fed's Hands Tied

The uncertainty complicates an already-difficult task for the Federal Reserve. After cutting rates three times at the end of 2025 to support a weak labor market, the central bank has been on hold this year. The war-induced inflation spike makes further cuts challenging, as they could add fuel to the fire. However, holding rates firm or raising them to fight inflation could stifle economic growth.

The bond market has reacted sharply to this dilemma. The yield on the 10-year Treasury note, a benchmark for mortgage rates and other loans, surged from just under 4% in late February to a high of 4.44%. Traders now see only a slim chance of a Fed rate cut this year.

Consumer confidence has remained surprisingly resilient, inching higher in March, according to the Conference Board. However, the survey showed a surge in 12-month inflation expectations to levels last seen in August 2025. A separate measure of short-term expectations for income and business conditions fell, remaining near a level that can signal a future recession.

This article is for informational purposes only and does not constitute investment advice.