Wall Street Stops Hyperventilating Over Iran
Is the Iran War panic already over?
Look, we know the war is not over. It may not even be close to over. But the market is no longer signaling a war drum sell-off, much less a bombs-away bear market or an Irancession.
Start with energy because that’s where the war story is supposed to start when the battlefield is near the Persian Gulf. Brent crude didn’t keep running on Wednesday. After two sessions of war-premium theatrics, prices basically went nowhere. Brent settled around $81.40 a barrel, essentially flat on the day.
Natural gas did the more interesting thing: it fell, hard, as traders backed away from the idea that a worst-case disruption would instantly become a long global energy squeeze. This is the behavior of a market that has begun to suspect it may have been conned into paying top dollar for a fear premium.
Then look at stocks. The Nasdaq led, up 1.29 percent. The S&P 500 gained 0.78 percent. The Dow rose 0.59 percent. The much neglected Russell 2000 index of smaller companies rose 1.11 percent. Even the mood music changed: the VIX dropped sharply, the market’s way of saying the fear factor has quieted.
Risk-On, Energy Shortage Off
The sector story matters because it tells you what investors think the war means for the real economy. On Wednesday, energy stocks lagged while the broader market rose. That’s not what you see when Wall Street is pricing a sustained energy shock. If traders truly believed we were headed for a long period of disrupted flows and resurgent inflation, you’d expect the energy complex to lead and the rest of the market to grit its teeth.
Instead, the market leaned “risk-on.” The consumer discretionary sector was the best performer of the day, soaring 2.24 percent, while the flight-to-safety consumer staples declined, inching down 0.73 percent. The bullish-on-the-future information technology and communications sectors jumped. In fact, apart from energy and consumer staples, every other sector in the S&P rose.
So, what does all that mean? It means investors, for now, are not buying the thesis that American households are about to get squeezed into retrenchment by a sudden, lasting energy shock. It means they are not buying the thesis that this is a straight-line trip from “war headline” to “bear market.” It means the market is—how to put this delicately—less impressed by the panic merchants than it was on Monday morning.
The PALM Rule Rules, Okay?
That brings us back to our rule: Panickers Always Lose Money—PALM. It’s a better guide to markets than the delusional TACO trade Wall Street used to obsess over. The pattern is familiar: the legacy-media worst-case scenario hits the wires, markets dump first, and then reality shows up and asks everyone why they fainted. We saw it last year with the Liberation Day Panic (the S&P is up about 34 percent since that early-April 2025 selloff). We saw it again this year with the Greenland Panic. And now we’re watching the early stages of an Iran War panic unwind.
To be fair, Wall Street may be learning—something that happens from time to time, despite much evidence to the contrary. This week’s selling was sharp in the mornings, but this was mostly reversed by the market close. Even when energy spiked, the market couldn’t hold the “permanent crisis” trade for more than a few hours at a time. Oil futures never got above $85 a barrel and came nowhere near the three-year high of $95.
We’re not declaring victory or (gulp) “mission accomplished.” The history of America’s military adventures over the past three-quarters of a century should be enough to ward anyone off from early celebration. And Federal Reserve officials could still drive the economy into a trench if they decide to turn hawkish on monetary policy because they do not like President Trump’s foreign policy. Central bankers have done stranger things with less provocation (see, for example, the Fed’s treatment of tariffs circa 2025).
But Wednesday’s message was simple: the market is not buying the idea that a prolonged supply disruption is inevitable. It’s also not buying the idea that American consumers are about to get squeezed into economic retrenchment.
The war may continue. The panic, at least for now, seems to be looking for an exit strategy.
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