LEVATUS Investments | First Take on Iran and Markets
Three days in, what we know and what we are watching.
Photo: NASA Visible Earth
The U.S. and Israel launched coordinated strikes on Iran over the weekend, drawing retaliatory strikes across the Gulf and Middle East and closing the Strait of Hormuz. Markets have so far responded with more discipline than alarm — but the variables that matter most are still unresolved.
March 2, 2026
Over the weekend, the U.S. and Israel launched coordinated strikes on Iran. Iran retaliated within hours with missiles and drones targeting Israel and U.S. military assets across the Gulf — striking Bahrain, Saudi Arabia, Qatar, the UAE, Kuwait, and Jordan. Civilian infrastructure, including major airports and ports, was also hit. It was subsequently confirmed that Supreme Leader Ayatollah Khamenei and dozens of senior officials were killed in the strikes. Iran has established a temporary leadership council. This remains an active and fast-moving situation now entering its third day.
What is happening in markets right now
Markets have reacted largely as one would expect — and so far, with more discipline than alarm. Oil approached $80 a barrel this morning before retreating to $77, up 7% since Friday. This is a meaningful move but not a disorderly one given that prices had already risen nearly 15% this year before the strikes. Equity markets opened sharply lower but recovered through the day, with the S&P 500 finishing nearly flat. International markets closed lower, having sold off before the U.S. recovery took hold and facing the additional headwind of a strengthening dollar. The rotation within equities tells the real story — energy and defense stocks gained, airlines and travel names fell, and quality, cash-rich companies held relatively well. Bond yields, after initially falling, moved higher as inflation concerns reasserted themselves and expectations for near-term rate cuts diminished.
The overall message from markets today is that investors are pricing in a short and contained conflict. That assumption bears watching.
What to Watch
The single most important variable is the duration of the conflict. Most analysts currently expect a conflict measured in weeks, not months. That base case is reflected in today's relatively orderly market behavior. But three threads deserve close attention.
The first is whether this widens further. Iran has already struck nine countries. Hezbollah has re-entered from Lebanon. The Houthis have resumed attacks in the Red Sea. The perimeter of this conflict is larger than markets may be fully pricing.
The second is China. Iran's oil exports flow almost entirely to China. Any sustained disruption to those shipments — whether through direct military interference or a broader closure of Gulf shipping lanes — would create a meaningful supply shock for the world's second largest economy, with ripple effects across global trade and equity markets that go well beyond energy stocks. China has publicly condemned the strikes but stopped short of meaningful support for Iran, and analysts are watching carefully whether Beijing uses this moment to seek broader concessions from Washington on trade and Taiwan.
The third is inflation. Sustained oil above $100 would materially change the calculus for the Federal Reserve and other central banks — delaying rate cuts, pressuring bonds, and adding a headwind to equity valuations that are already not cheap. A chokehold in the Straits of Hormuz could be a catalyst. We are not there yet, but it is the scenario worth modeling.
Our perspective
This is a genuinely significant geopolitical event — not a routine flare-up. The death of Iran's Supreme Leader, active U.S. military engagement, the potential of a closed Strait of Hormuz, and Iranian strikes across nine countries represent a meaningful and still-evolving shift in global risk. Markets are still finding their footing — and that is appropriate given what is unfolding.
That said, the framework for thinking about this has not changed. We have always built your portfolio with the understanding that the world is unpredictable — that geopolitical shocks, inflation surprises, and acute volatility are not exceptions to the plan, they are part of it. Diversification, quality, and strategic patience are the architecture we rely on precisely in moments like this one.
What we are watching most closely is whether this conflict remains contained and short, or whether it widens into something more prolonged. Those are two very different outcomes with very different implications. We will continue to monitor developments.
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ABOUT THE AUTHOR
Susan Dahl is a seasoned executive, industry leader, and dedicated client advisor, with over thirty years of international and domestic investment experience working for both large and small organizations. Susan is known for her ability to unravel complex questions, and her steadfast commitment to well designed process. This background has translated directly into her work on investment process design for private wealth clients, as well as the LEVATUS' Integrated Wealth Service model. Susan's investment background spans asset classes and geographies — a combination that is increasingly rare and directly relevant to the complexity her clients navigate.
The U.S. and Israel launched coordinated strikes on Iran over the weekend, drawing retaliatory strikes across the Gulf and Middle East and closing the Strait of Hormuz. Markets have so far responded with more discipline than alarm — but the variables that matter most are still unresolved.