The financial market impact from the U.S.-led war with Iran, now entering its fourth week, is starting to spread across asset classes and threatens to accelerate into a broad-based selloff similar to the bear market of 2022. 

Gold prices have turned negative for the year, having fallen for nine consecutive days to trade some 25% south of the record highs they reached in late January. Silver, another haven metals trade, is also spiraling and has lost more than 40% of its value since its early winter peak. 

The capitulation suggests global investors are bracing for a long, costly conflict in the Persian Gulf region that is likely to completely reset growth, inflation, and profit expectations in all major markets over the coming months. 

And there is little indication at present that tensions in the region will diminish. President Donald Trump set a Monday deadline for Iran to reopen the Strait of Hormuz otherwise he will “hit and obliterate” the country’s power plants. Tehran has continued to pound targets in the Gulf and vowed to retaliate in kind should the U.S. target its energy infrastructure. 

U.S. crude oil prices surged above $113 again Monday, adding to this year’s gain of around 75%, while Brent futures contracts see no return to prewar levels until August of 2027.

The last time crude traded in similar fashion was during the aftermath of Russia’s invasion of Ukraine in 2022. That triggered, in part, a bear market for stocks that lopped nearly 23% from the S&P 500 in just six months.

Moreover, the benchmark is on course to hit correction territory—when an index falls 10% from its recent high, in this case its late January peak.

What happens next is anyone’s guess, but the signals from virtually every market in the world suggest the echoes of 2022 are growing louder by the day.

—Martin Baccardax

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Oil tankers stalled in the Persian Gulf may be the most visible economic symbol of the Iran war, but the damage is spreading to areas that aren’t as immediately obvious, including American farmers, Asian chip makers, and European drugmakers. The supply-chain mess is disrupting the global economy and boosting inflation.

• U.S. retail gasoline prices have surged but consumers aren’t forming lines at gas stations just yet. Still, Moody’s economist Mark Zandi wrote that the war, and a weakening U.S. labor market, have raised the odds of a recession in the next year to an “uncomfortably high 49%.”

• But the war has cut off access to about 20% of the world’s crude oil and another 20% of the liquefied natural gas, or LNG, that normally traverses the Strait of Hormuz. That’s a problem for the rest of the world. Oil prices are up about 50% since the war began.

• Spain Prime Minister Pedro Sanchez called for the opening of Hormuz and the preservation of “all energy sites” in the Middle East. That was after President Donald Trump threatened to bomb Iran’s power plants if the strait weren’t cleared for shipping traffic by the end of day Monday.

• Sanchez said the world “should not pay the consequences of this war.” France’s Emmanuel Macron also called for “restraint.” Apart from oil and LNG, the war has disrupted supplies and trade of certain other crucial materials, including urea fertilizer, helium (which is used to make microchips), and aluminum.

What’s Next: A quick resolution would push inflation higher but only shave a little off GDP. But if Iran succeeds in blocking the strait for months, and oil stays above $100, Citigroup’s Nathan Sheets thinks it could shave 0.9 percentage points off his expectations for 2.9% global GDP growth this year.

—Avi Salzman, Reshma Kapadia, and Liz Moyer

Spring break air travelers saw first hand over the weekend what the ongoing government shutdown means for them, with many stuck in two or three hour security checkpoint lines at several airports including Houston, Atlanta, Newark, and New York’s LaGuardia. President Trump is sending ICE agents today to help out.

• More than 400 workers from the Transportation Security Administration, which runs airport checkpoints, have quit since the government shutdown in February. The shutdown has meant TSA officers are working but not being paid, but increasingly they are calling out sick.

• Border czar Tom Homan told Fox News Sunday ICE agents would be acting as a force multiplier, and they would decide Sunday which airports should expect to see them. But Everett Kelley, the national president of the American Federation of Government Employees, said ICE agents aren’t trained for the work.

• Transportation Secretary Sean Duffy told ABC’s This Week that things may get worse. “If this Homeland Security funding isn’t resolved, I think you’re going to see more TSA agents, as we come to Thursday, Friday, Saturday of next week, they’re going to quit or they’re not going to show up,” he told the show.

• Elon Musk, the world’s richest person and Tesla CEO, said on his social media feed that he is offering to pay the salaries of TSA personnel. Lawmakers attempted another bill to at least pay the TSA workers, but the vote failed on Saturday.

What’s Next: Twenty airports, including San Francisco International Airport, Orlando Sanford International Airport, and Kansas City International Airport, use private security to process travelers through a TSA program, so travelers through those locations aren’t seeing the same disruptions.

—Liz Moyer

While freeing Fannie Mae and Freddie Mac from government control may not be immediate, big investors are actively campaigning on an outcome. Hedge fund manager Bill Ackman has been meeting with administration officials, urging them to retire the government’s “senior” preferred shares that give it a $370 billion claim.

• The Pershing Square CEO pitched that plan in meetings with National Economic Council Director Kevin Hassett, White House Deputy Chief of Staff James Blair, Federal Housing Finance Agency Director Bill Pulte, and Treasury Under Secretary for Domestic Finance Jonathan McKernan, people familiar with the matter told Barron’s.

• A Pershing Square spokesman declined to comment. Depending on the president’s decisions, a restructuring could wipe out existing shareholders or alternatively see them realize a return of hundreds of billions of dollars on their investments. 

• In the nearly 18 years since the government’s 2008 bailout, many shareholders have brought lawsuits and lobbied the government hoping the companies will be released or restructured in a way that makes share prices go up. Ackman has disclosed owning more than 10% of Fannie and Freddie’s common shares.

• Fannie and Freddie shares soared last year after Trump said he was working on taking the companies public. Untangling the government’s stake is the critical issue for private shareholders in Fannie and Freddie, which buy mortgages from lenders and form the backbone of the U.S. housing market. 

What’s Next: It isn’t clear how receptive the government officials were to Ackman’s plan. Instead of retiring the senior preferred shares, Trump could decide to convert them to common shares, severely diluting the value of the existing common stock. He could also decide to do nothing.

—Joe Light and Janet H. Cho

Elon Musk has made good on his Terafab promise, and it’s big. On Saturday night, the Tesla and SpaceX CEO outlined a bold vision for vertically integrating chip production into his plans to create an artificial-intelligence empire. 

• At a defunct power plant, Musk announced plans to build a semiconductor manufacturing plant, to be a joint venture between Tesla, xAI, and SpaceX. (SpaceX merged with xAI earlier this year).

• The initial stages of the project will cost tens of billions of dollars. Tesla is planning to spend about $20 billion on new equipment in 2026, up from less than $9 billion in 2025. Terafab spending is not part of the 2026 forecast.

• The project is needed to meet a coming shortfall of advanced chips capable of powering AI applications, including robo-taxis and robots. Musk believes 80% of Terafab’s output will end up in space, where SpaceX will be doing AI computing that hyperscalers currently perform on Earth.

• The Terafab will focus on so-called two-nanometer nodes, which represent the state of the art in semiconductor design and manufacturing.

What’s Next: It will take time to ramp up production, but Musk’s timeline for the Terafab is characteristically aggressive, with initial semiconductor production projected for late 2027 and volume production for 2028. It typically takes three years from groundbreaking to production at other semiconductor facilities.

—Al Root and Alex Kozul-Wright 

Amazon may be known for e-commerce and cloud computing, but its movie studio MGM has just scored its