MW Financial markets are responding to the Iran conflict in unexpected ways - leaving some investors puzzled

By Gordon Gottsegen and Joseph Adinolfi

Gold, often a haven during times of stress, has been falling. Meanwhile, stocks are down, but not as much as many expected.

Markets are sending investors mixed signals.

Although President Trump initially said war with Iran would last four weeks or less, the conflict has been going on for three weeks now and shows no end in sight.

Investors find themselves in the middle of a hot war in the Middle East, with oil prices touching their highest levels in years. Yet despite all of this economic and geopolitical chaos, gold and silver prices seemingly can't stop sliding.

The most active gold futures contract (GC00) lost $486.80 per troy ounce, or 9.6%, this week to settle at $4,574.90, according to Dow Jones Market Data. That marked its worst week in 14 years. In the past, during times of geopolitical stress, gold has appreciated as investors sought refuge in the yellow metal - but not this time.

See: Gold isn't your safe haven in this war: It just logged its biggest weekly drop in over 14 years

Actually, a lot of assets are dashing investors' expectations regarding how they should behave during such a difficult period.

"What does it all mean? Why are yields and bitcoin higher while risk assets are down and the dollar is bid?" said Jurrien Timmer, director of global macro at Fidelity, in a post on X. "So many questions."

As a result, investors are trying to figure out the extent to which the Iran war will impact markets, and how to price that in. But a look at equity, bond and commodity markets shows that investors are having trouble doing so. Some said it seems like different markets are sending very different signals about how the situation is expected to play out.

The main impact of the war has been on oil prices due to Iran's control of the Strait of Hormuz, a major chokepoint for the world's crude supply chain. Crude-oil prices have shot up following the onset of the conflict, with Brent futures (BRN00) trading Friday around $112 a barrel. These higher oil prices are already starting to seep into the U.S. economy, causing Americans to pay more at the gas pump - but economists worry that high oil prices could also cause inflation to rise, negatively impact consumer sentiment and eventually impact the companies most exposed to energy prices.

Also read: Oil prices are the No. 1 thing investors are watching right now. Here's why.

However, U.S. stocks have yet to fully price in the effects that high oil prices could have on the American economy. Instead, the U.S. equity market appears to holding out hope for a reversal of the war in Iran from the Trump administration. On Wall Street, such a maneuver has gained the moniker "TACO," which stands for "Trump always chickens out."

Craig Shapiro, a senior macro strategist at NinjaTrader, wrote in a post on X that "the market is pricing TACO as near-certain and imminent." He noted that the S&P 500's SPX historical pain threshold - like a correction reflecting a 10% drop from all-time highs - hasn't been reached yet. The S&P 500 has fallen over 5% since the onset of the war, but there are a few factors under the hood that are keeping the index higher.

While sending more Marines and warships to the Middle East on Friday, Trump said he doesn't want a cease-fire with Iran. Yet Wall Street still seems somewhat optimistic about a pivot that avoids a worse-case scenario.

"Historically, geopolitical conflicts have a short and modest impact on capital markets beyond the initial period of volatility. You can see that since 1980, the S&P 500 has been up, on average, 1% in the month and 3% in the three months following a geopolitical event," said Mark Hackett, chief market strategist at Nationwide Investment Management Group.

The impact of the war is being felt more acutely in other markets. The yield on the 10-year Treasury note BX:TMUBMUSD10Y has risen to 4.39%, a notable climb since the start of the month. Instead of investors flocking to Treasurys in a flight to safety, Hackett said this move indicates investors are nervous about the impact of inflation and rising U.S. debt. It also points to fears that the Fed may have to hike interest rates to tamp down another wave of inflation, if rising oil prices start to push prices for consumer goods higher.

Read: Stocks, bonds struggle as traders now see chances of Fed rate hike at over 50% - up sharply from earlier this week

Gold has been the most puzzling asset of all. Some strategists have told MarketWatch that the strong momentum displayed by gold over the past year means it now trades more similarly to risk assets like stocks. Others cited different reasons.

"Gold has been weighed down more by strength in U.S. dollar and yields than finding support from haven flows. I think gold will ultimately prevail, but the oil shock is too significant a force to ignore, even for gold," said Fawad Razaqzada, market analyst at StoneX.

Gold tends to perform well during times of geopolitical conflict. But similar to Treasurys, investors are now grappling with the fact that central banks may have to raise rates to control oil-induced inflation, and that could provide a headwind for gold's strength against currencies like the U.S. dollar DXY, Razaqzada noted.

On top of that, it's hard for gold investors to ignore the run-up in gold prices that has happened over the last year. Gold prices rose by more than 60% in 2025, and the rally continued into the start of 2026.

"There's been risk-off [sentiment] in general for the market, and gold started to act a little bit more like a speculative asset earlier this year [and] late last year," said Liz Thomas, head of investment strategy at SoFi. "Right now, it's as if everything that had done really well is being punished for having done really well.

"As soon as there was fear in the minds of investors, I think they started to let go of the stuff that had done really well, and gold falls into that category," Thomas added. "I do think that gold continues to have a lot of steady demand from central banks and from institutions. That doesn't mean it won't be volatile in the near term, because individual investors have gotten into it and there's been a lot of activity via ETFs."

While gold has struggled, cryptocurrencies like bitcoin (BTCUSD) have climbed. By appreciating, bitcoin is bucking its longstanding correlation with stocks. The benchmark crypto was up about 8% in March at last check, according to data provided by Kraken.

While bitcoin is touted by its evangelists as a hedge against inflation and uncertainty, in reality, it has long traded more like a technology stock.

See: Bitcoin's latest selloff is shattering many of its most enduring myths

-Gordon Gottsegen -Joseph Adinolfi

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March 21, 2026 08:00 ET (12:00 GMT)

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