Geopolitics takes the wheel as Iran conflict widens

US equity markets overview

United States (US) equity markets closed lower on Friday, impacted by persistent inflation data, escalating geopolitical tensions, and increasing concerns about vulnerabilities in private credit. For the week, the Dow Jones shed 648 points (-1.31%), the S&P 500 dropped 0.44%, and the Nasdaq 100 declined 0.21%.

The last 48 hours have escalated into a significant crisis, with tensions in the Gulf rapidly spiralling into a major conflict.

Escalation in the Gulf

President Trump has framed the operation as a push towards regime change, underscored by the reported killing of Supreme Leader Ali Khamenei. Crucially, President Trump also expressed his expectation that the operation would conclude within four weeks. Tehran has responded swiftly and broadly, firing on Israel and launching retaliatory missile strikes against US bases and regional allies across Jordan, Iraq, Saudi Arabia, Bahrain, Kuwait, the United Arab Emirates (UAE), Oman, and Qatar.

Hormuz: a no-go zone

The Strait of Hormuz, through which 20% of the world’s oil flows, has effectively become a no-go zone. While Tehran has not formally declared a closure, the Iranian Revolutionary Guard Corps (IRGC) is issuing warnings via VHF radio that 'no ship is allowed to pass'. Additionally, reports indicate that insurers are now cancelling policies and increasing premiums, by up to 50% in some cases, for ships attempting to transit the Gulf and the Strait of Hormuz.

The supply equation

The Organisation of the Petroleum Exporting Countries (OPEC+) attempted to calm nerves on Sunday by agreeing to a modest output increase of 206,000 barrels per day starting in April. While this exceeds some prior expectations, it seems a token gesture against the backdrop of a paralysed Strait of Hormuz.

Assessing the macro risk

While predicting the trajectory of the conflict is impossible, it is critical to recognise significant risks, particularly if the regime were to lose control over the unpredictable IRGC.

Beyond this morning's sharp rally, which saw the price of WTI crude oil hit a high of US$75.33 (+11.90%), before easing back to US$70.97 (+5.83%), the trajectory of oil prices will hinge on several variables including:

• How many barrels are physically disrupted
• Duration of the blockade or conflict
• Whether nations will tap their Strategic Petroleum Reserve (SPR)
• Whether the Iranian regime will target major oil infrastructure, like Iraq did in 1991

The scenarios

If the conflict abates rapidly, the oil price spike could prove short-lived and ease back towards US$60.00. However, a prolonged conflict – potentially involving support for Iran from Hezbollah – would significantly amplify the upside risks to the crude oil price.

Implications for US equity markets

A protracted Middle East crisis, marked by an extended closure of the Strait of Hormuz, reshapes the risk landscape for US equity markets. Such a scenario guarantees a sustained surge in oil prices, reignites inflation fears, and crushes hopes for additional Federal Reserve (Fed) rate cuts.

This erosion of rate cut expectations, coupled with soaring energy costs and rising inflation, would invariably weigh on risk sentiment towards US equity markets. This is precisely why US S&P 500 equity futures are trading 0.80% lower at approximately 6830, following their reopening this morning.

Earnings and data watch

Aside from events in the Middle East, the fourth quarter (Q4) 2025 earnings season enters the home stretch this week, with reports due from companies including Target, CrowdStrike, Broadcom, Okta, JD.com, Costco, and Marvell Technology.

On the economic data front, the main event is Friday's non-farm payrolls report. For February, the consensus anticipates a gain of 60,000 jobs with the unemployment rate holding steady around 4.3%. The interest rates market begins the week pricing in a roughly 93% chance of no rate change in March, with the first meaningful cut now eyed for June.

Nasdaq 100 technical analysis

The Nasdaq 100 has been in a corrective phase since hitting its late-October peak of 26,182, with the pattern reinforced by a clear double top formed in late January.

In an ideal scenario, this pullback would test the key support zone around the 200-day moving average (MA) at 24,106 – a level close to the 21 November low of 23,854. This confluence of support would be the natural spot to watch for early signs of basing and potential reversal, and it needs to hold to prevent a deeper pullback from developing.

In the event the Nasdaq doesn’t retrace to the support zone highlighted above, look for early signs the correction is complete. Strong confirmation would come from the Nasdaq 100 clearing the mid-February high at 25,382. This would then set up a test of record highs at 26,182 before a move to 27,000.

Nasdaq 100 daily candlestick chart

Dow Jones technical analysis

After five weeks of consolidation between 48,500 and 49,600 at the start of 2026, the Dow Jones burst to life to hit a fresh record high of 50,512.

However, since then, the Dow Jones has fallen back into its former 48,500 – 49,600 range and in the process appears to have drawn a head and shoulders type topping pattern with the neckline sitting around 48,500 – 48,400.

If the Dow Jones were to see a sustained break below this 48,500 – 48,400 support zone, it would compound the technical damage that followed its break of the uptrend support from the April lows and open the way for a deeper decline towards approximately 46,500.

Dow Jones daily candlestick chart

• _{Source: TradingView. The figures stated are as of 2 March 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}