U.S. stocks are "unusually calm." Faced with the risk from Iran, is the market waiting or complacent?
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Geopolitical tensions in the Middle East escalated over the weekend, but the US stock market showed an unexpectedly “calm” response.
On March 2nd, the US stock market initially reacted with a sell-off at the opening, but quickly digested the shock: stocks rebounded more than 1% from the early lows and closed “nearly unchanged.”
Goldman Sachs' trading desk described the market sentiment more bluntly: The market is downplaying geopolitical volatility, while a large number of “incomprehensible counter-moves” appeared. The ongoing feedback they receive: “The sub-sectors we expected to open up or go down ended up doing exactly the opposite.”
More noteworthy for investors is the scale of trading: the market was unusually quiet. Trading volume declined, Nasdaq 100 component stocks saw a drop of over 10% according to volume tracking; after an intraday rebound, investors were reluctant to make major portfolio changes, and individual stock trading was restrained, “many people seemed frozen.”
Sectors moved “counterintuitively”: Tech held up, but defensive healthcare did not
Goldman Sachs’ trading department noted that although the US stock market rebounded over 1% from morning lows, there were still many confusing “contrary” moves within the market. The defensive healthcare sector, originally considered a safe haven, saw a sharp decline, while tech and software stocks rebounded strongly and recovered previous losses. This unusual flow of funds has puzzled traders.
The rebound at the index level was driven by mega-cap tech stocks.
The performance of the “Mag7” leaned more defensive, which differs from the typical “source of funds” logic seen earlier this year.
Software stocks surged, recouping all of Friday's losses; SaaS also rose that day and continued its previous squeeze-style rebound.
Meanwhile, another “seemingly unrelated” move appeared: HALO stock also rose sharply that day despite strength in tech/software.
Even more striking: On a trading day marked by rising geopolitical uncertainty, the healthcare sector became an obvious loser. Goldman Sachs specifically called it the “most typical ‘counter-move’”—when investors expected defensive sectors to outshine, healthcare instead plunged.
Looking at S&P 500 sectors, energy was the top performer of the day (directly reflecting rising oil prices), while consumer sectors (both staples and discretionary) were among the biggest losers.
Risk premium priced into oil and shipping, Brent up 7%
On this day, the most direct channel for pricing geopolitical upgrades was energy: front-month Brent crude jumped about 7%, US Henry Hub natural gas rose 12%. Shipping rates related to tankers also soared, Breakwave Tanker Shipping ETF (BWET) surged, showing that the shipping side rapidly priced in risk.
Chris Larkin of Morgan Stanley E Trade pointed out that the market’s “main switch” is still oil prices:
“There are far more questions than answers now, but if the energy situation stabilizes, it could lead to positive knock-on effects; if there are concerns about long-term disruption, the impact could be opposite.”
Worth noting, oil prices did not rise one-way to the top. The report also mentions crude clearly fell back below the intraday peak.
Bonds not a “safe haven,” but pricing in inflation; 10-year surged above 4.06%
Even more surprising for investors was the reaction of bonds: US Treasuries briefly strengthened at the open, then turned down with losses expanding, yields rose 9-12 basis points intraday. The 10-year yield jumped from about 3.92% at the open to above 4.00%, hitting an intraday high above 4.06%.
This “safe haven not buying bonds” reversal has been interpreted as traders betting more on the inflationary aspect brought on by conflict, rather than immediately rushing to traditional safe assets; rising oil prices further increased yield pressure. The report also mentioned the “price” sub-index in the day’s manufacturing survey showed a shockingly strong rise, furthering this pricing direction.
Meanwhile, despite weaker Treasuries, the US dollar strengthened against major currencies, hitting a one-month high (especially vs. the euro), showing traces of “migration to quality” trades. Bitcoin rebounded after the typical “sell then buy” pattern, climbing back to $70,000.
J.P. Morgan: The key is not “what happened,” but “how long it will last”
Nevertheless, JPMorgan’s commodities team emphasizes that when evaluating the impact of geopolitical crises on oil prices, “timing” is the most difficult and critical variable.
On the question of “how conflict affects asset prices,” JPMorgan lists three key risks:
Strait of Hormuz: If the strait is closed, WTI crude may go above $100. Currently it looks more like partial blockage, no disruptions at production facilities; meanwhile, the US “appears to have destroyed at least nine Iranian navy vessels.” The latest news: Iran has announced the closure of the Strait of Hormuz.Escalation of external military aid: Reuters mentions the possibility of China providing Iran with hypersonic missiles, which would threaten US naval concentration (including carriers). JPMorgan sees, the more US casualties (currently 3 dead in Kuwait), the more likely the situation heads toward a “multi-year, full-scale war.”Conflict spillover: Iran’s missile range is about 2,000 kilometers (1,200 miles), potentially extending strikes to US or allied commercial interests in Eastern/Central Europe or India.
JPMorgan’s commodity team stresses “the toughest variable is pace”: Trump said strikes could last up to four weeks, previously citing 4-5 days; later said “no ceasefire until goals are met.”
According to CCTV News, on March 1st US President Trump said in a video that the US and Israel will continue military actions against Iran until all goals are met. Iran's Foreign Minister Aragchi said Iran will decide when and how to end the US-Israeli imposed war of aggression.
The Wall Street Journal mentioned US ammunition reserves are under pressure due to multi-front involvement, combined with allies’ reluctance for ground war, making the current approach more like “surgical strikes,” but the path may still change.
They see the possibility for the military confrontation to end within a month: Trump may be willing to talk to Iran’s interim government; Senator Lindsay Graham softened wording from “regime change” to “removal of threats.” “Regime change” usually means years of strikes and possible need for ground troops, and whether Congress supports longer conflict remains unclear.
Hormuz: Never truly closed in history, but any disruption raises risk pricing
JPMorgan offers structural facts about the Strait of Hormuz to differentiate “sentiment” from “sustained disruption”:
- The narrowest point is only 21 miles, connecting the Persian Gulf with the Indian Ocean, carrying about 30% of global seaborne crude and 20% of global LNG.
- Crude oil, refined products, and LNG exports from Iran, Iraq, Kuwait, Bahrain, Qatar, Saudi Arabia, UAE all go through it.
- Despite repeated threats, the Strait has never been closed in history—even during major crises, crude oil kept flowing.
- During the 1980 “Tanker War,” 259 tankers were attacked, Gulf exports persisted, global oil price impact was limited (partly due to increased use of land pipelines).
All these facts point to one trading logic: the market truly needs time to answer how severe and sustained the disruption will be.
History shows: oil price spikes do not necessarily drag down stocks, but “duration” determines the tail risk
Statistics compiled by the report show that, since 2000, WTI crude oil saw 22 instances of single-day gains over 10%. Corresponding S&P 500 forward returns were not uniformly pessimistic:
- 1 day: average -0.24% (median -0.01%)
- 1 week: average +0.52% (median +1.30%)
- 2 weeks: average -0.35% (median +1.75%)
1 month: average +1.23% (median +3.57%)
Goldman Sachs trader Dom Wilson’s team offers a more “conditional” assessment: Oil shocks are typically negative for stocks and credit, but only when disruption is severe and prolonged do they have a meaningful impact on global growth. They expect, given strong positions and gains at the start of the year, that cyclical sectors and oil importers will be more pressured by moves to adjust positions unless the situation is quickly resolved.
Putting all these clues together, the market currently seems to be making a two-layer distinction:
- The stock index chooses to “look through” short-term shocks and continues to focus on AI trading, US GDP trajectory, and corporate policy uncertainty;
- But rates and energy are being quickly repriced, especially as rising yields and rising oil prices overlap, the market appears to be trading a “re-ignition of inflation risk.”
JPMorgan’s further conclusion: a considerable portion of geopolitical risk may already be priced into equities (assuming prices are above future strip levels), so they tend to stay cautious about initial stock market excitement and warn risk assets may see a 1-2 week downward phase.
Risk Warning and DisclaimerThe market carries risks, investors need to be cautious. This article does not constitute personal investment advice, nor does it take into account individual users' specific investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. Investing based on this information is at your own risk. ```