New York
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Stocks have climbed, bond yields have fallen and the US dollar has weakened throughout President Donald Trump’s second time period up to now — market actions the president has welcomed.
But the war with Iran is threatening to disrupt that, sending shares decrease and pushing yields and the dollar larger.
That complicates the narrative for a president who prides himself on record-high shares, low borrowing prices and a weaker dollar for enhancing manufacturing. And with a razor-thin Republican majority in the House of Representatives at stake, that might make Trump’s pitch to midterm voters a tougher promote.
The longer the battle goes, the longer shares, bonds and the dollar may all commerce in precisely the reverse approach Trump needs.
Trump typically touted record-high shares earlier than the war, as when the Dow hit 50,000 points final month. He’s regularly referred to the market’s energy as proof of his presidency’s success.
“The stock market has done so well, setting all those records — your 401(k)s are way up,” Trump stated throughout his State of the Union address on February 24.
But the Dow has dropped roughly 7% since its newest report excessive on February 10, as traders worry about global oil flows due to the war.
“The conflict in the Middle East and related headlines are still the major source of fluctuations in markets,” Sameer Samana, head of world equities and actual belongings at Wells Fargo Investment Institute, stated in an electronic mail.
Samana stated he thinks the battle will final weeks or a number of months and not meaningfully change the outlook for shares. The secret is time: The longer the battle rages, the extra market uncertainty there will likely be.
The S&P 500 is down 3% this month — sufficient to put the index into the pink for the yr. And it’s been six weeks since the S&P hit a report excessive.
“It really comes back to the duration. How long is this going to take?” stated Mike Skordeles, head of US economics at Truist.
The key 10-year US Treasury yield has climbed since the war with Iran started as traders, anxious larger oil costs will enhance inflation, promote bonds. The 10-year US Treasury yield rose from 3.96% at the finish of February to 4.26% as of Wednesday.
Yields, which rise when bond costs fall, affect borrowing prices throughout the financial system, together with mortgage charges.
In the previous, the market has served as a examine on the White House. The president has backed off coverage proposals like tariffs after they rocked the inventory and bond markets concurrently.
The Trump administration has stated it’s targeted on reducing Treasury yields to tackle affordability in addition to to decrease curiosity funds the US authorities owes on the nationwide debt.
The 10-year yield is barely at its highest degree in a month. But the yield’s climb final week was its largest weekly leap since April, when markets had been jolted by massive tariff uncertainty.
Resurgent inflation due to power costs may additionally make the Federal Reserve much less possible to minimize rates of interest, at odds with the president’s desire for decrease charges.
Economists at Goldman Sachs on Wednesday modified their forecast for the subsequent Fed charge minimize from June to September. Traders on Thursday started pricing in no charge cuts this yr, in accordance to CME FedWatch.
A weaker dollar could make US items cheaper for different international locations, serving as a tailwind for home manufacturing and boosting exports. That aligns with the Trump administration’s aim of reviving American manufacturing.
But the war with Iran has despatched the dollar rebounding. The US dollar index has climbed greater than 2% this month as traders flock to protected havens and as analysts see fewer Fed rate of interest cuts forward.
Treasury Secretary Scott Bessent stated in January that the United States has a powerful dollar coverage. But a rising dollar is at odds with the White House’s hoped-for manufacturing renaissance.
Before the war, the dollar index was down 0.7% in 2026 after falling 9% in 2025.
The index is now up roughly 1.4% this yr, although it’s nonetheless down 3.74% since this time final yr. (The index measures the dollar towards a basket of main currencies.)
Rising Treasury yields complicate the Trump administration’s push for decrease borrowing prices. A stronger dollar impedes visions of buying and selling companions scooping up cheaper American items. And decrease shares battle with the president’s love of report highs. Whether these strikes proceed relies on the value of oil and the length of the battle.
“There’s just going to be more headline risk in the market, more choppiness, until there’s more details on the timeline here,” stated Adam Turnquist, chief technical strategist at LPL Financial.
This story has been up to date with latest market actions.