Red ink spreads on Wall Street

San José, CA – Stocks sank for a second day in a row, March 27, with all the major stock market indices dropping more than 1.5%. Stock prices were down for the week, making it four weeks in row that stocks have dropped.

While stock prices rose when Trump announced he was postponing an escalation of the U.S.-Israeli bombing campaign earlier, when he did this again on Thursday, stock fell on Friday. This shows that Wall Street is seeing through his almost weekly proclamations that the U.S. and Israel had “won,” or that Iran is desperate to negotiate an end to the war, that the war would be over soon, etc.

The reality is that Iran has taken effective control of the Straits of Hormuz, only letting through ships with Iranian oil or with cargos destined for non-U.S. allies such as China. Iran has been preparing for this attack for more than three decades, ever since the U.S. egged on Iraq to invade Iran in the 1980s.

Trump is actually the one who needs to end the war, as he becomes more and more unpopular just as the November midterm elections are coming up, threatening a loss of the House of Representatives and possibly even the Senate from Republican control. Trump’s “Plan B” is to further escalate by putting “boots on the ground” as thousands of Marines and Army troops are on their way to the war zone. The administration is also asking for an additional $200 billion in military spending, which could only mean a longer and wider war.

The Trump administration has learned nothing from the trade war with China last year, where the U.S. ultimately had to back down as China matched tariff for tariff and then won with export controls on critical minerals. Nor did the administration learn from the U.S. defeat in Afghanistan. As one pundit said, “While the United States took 20 years to replace the Taliban with the Taliban in Afghanistan, Trump has managed to replace the Ayatollah Khamenei with Ayatollah Khamenei in 20 days!”

On Wall Street, the prices of bonds also fell, meaning that interest rates on the bonds went up. The interest rate on the benchmark ten-year treasury bond has gone up by almost half a percentage point, from 3.96% before the war started to going up by 0.4 to 0.6 percentage points, making buying a home even less affordable.

More and more financial analysts are coming around to the view that Wall Street investors are still underestimating the length and cost of the war, hoping that there will be a quick end. What Wall Street and the Trump administration don’t seem to understand is that while it only takes one side to start a war, it takes both sides to end a war. With Iran holding firm under the U.S.-Israeli bombs, and the weakness of the U.S. side showing when the Trump administration lifted sanctions on Iranian and Russian oil, it is not clear why Iran would want to end the war any time soon.

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