Financial markets are reacting to the Iran crisis in surprising manners, causing confusion among certain investors

Markets Deliver Unclear Signals Amid Middle East Turmoil

Despite President Donald Trump’s initial prediction that the conflict with Iran would be resolved in less than a month, the situation has now persisted for three weeks with no resolution in sight.

Investors are navigating a volatile Middle East conflict, which has driven oil prices to their highest levels in years. Surprisingly, even as global uncertainty rises, gold and silver prices have continued to decline.

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Last week, the most actively traded gold futures contract (GC00) plummeted $486.80 per troy ounce, a 9.6% drop, closing at $4,574.90—its steepest weekly decline in over 14 years, according to Dow Jones Market Data. Traditionally, gold has been a safe haven during geopolitical unrest, but this time, it’s bucking the trend.

Many assets are behaving in unexpected ways, defying investors’ assumptions about how they should react during periods of crisis.

As the conflict continues, investors are struggling to assess its potential impact on financial markets. A review of equities, bonds, and commodities reveals that different sectors are sending conflicting signals about the future.

Oil Prices Surge as Iran Controls Key Supply Route

The war’s most significant effect has been on oil, as Iran’s influence over the Strait of Hormuz—a critical passage for global crude shipments—has pushed prices sharply higher. Brent crude futures recently hovered around $112 per barrel. These increases are already affecting American consumers at the gas pump, and economists warn that sustained high oil prices could fuel inflation, dampen consumer confidence, and hurt companies most sensitive to energy costs.

However, U.S. stocks have yet to fully reflect the risks posed by elevated oil prices. Instead, the equity market appears to be holding out hope for a policy reversal from the Trump administration regarding Iran. On Wall Street, this expectation is known as “TACO”—short for “Trump always chickens out.”

Wall Street’s Outlook and Market Reactions

Craig Shapiro, senior macro strategist at NinjaTrader, commented that the market is treating a “TACO” outcome as nearly certain and imminent. He pointed out that the S&P 500 has not yet reached a typical correction threshold (a 10% drop from record highs), having fallen just over 5% since the conflict began. Several underlying factors are helping to support the index.

Even as the U.S. sends more military resources to the region, President Trump has stated he does not seek a cease-fire with Iran. Nevertheless, investors remain somewhat optimistic that a worst-case scenario can be avoided.

“Historically, geopolitical events tend to have only a brief and moderate effect on capital markets beyond the initial volatility. Since 1980, the S&P 500 has averaged a 1% gain in the month and a 3% gain in the three months following such events,” explained Mark Hackett, chief market strategist at Nationwide Investment Management Group.

The war’s impact is more pronounced in other markets. The yield on the 10-year Treasury note has climbed to 4.39%, a significant increase since the beginning of the month. Rather than seeking safety in Treasurys, investors appear concerned about inflation and rising U.S. debt, raising the possibility that the Federal Reserve may need to hike interest rates if oil-driven inflation intensifies.

Gold and Bitcoin: Unusual Moves in Uncertain Times

Gold’s recent behavior has puzzled many analysts. Some suggest that gold’s strong performance over the past year has caused it to trade more like a risk asset, similar to stocks. Others point to different factors.

“Gold has been pressured more by a strong U.S. dollar and rising yields than by safe-haven demand. While I believe gold will eventually recover, the oil shock is too powerful to ignore—even for gold,” said Fawad Razaqzada, market analyst at StoneX.

Although gold typically benefits during geopolitical crises, investors are now worried that central banks may need to raise rates to combat oil-driven inflation, which could limit gold’s appeal against currencies like the U.S. dollar.

Additionally, gold’s rapid ascent over the past year is hard for investors to overlook. In 2025, gold prices surged more than 60%, with the rally continuing into early 2026.

“There’s been a general risk-off mood in the market, and gold started behaving more like a speculative asset late last year and earlier this year,” said Liz Thomas, head of investment strategy at SoFi. “Now, it seems that assets which performed well are being sold off. Gold fits that pattern.”

Thomas added, “Central banks and institutions continue to show strong demand for gold, but that doesn’t mean it won’t be volatile in the short term, especially as individual investors and ETFs have become more active.”

While gold has faltered, cryptocurrencies such as bitcoin have rallied. Bitcoin’s price has risen about 8% in March, breaking its usual correlation with stocks.

Although bitcoin is often promoted as a hedge against inflation and uncertainty, it has historically traded more like a tech stock.

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