The US and Iran didn't reach an agreement, and Wall Street's latest warning! These types of stocks may be spared

The U.S.-Iran war has become an important factor influencing U.S. stocks and the global stock market.

On Wednesday, the White House insisted that peace negotiations with Iran are still ongoing, leading to a slight increase in the three major U.S. stock indices. However, since the war began on February 28, the S&P 500 index has experienced a continuous decline, with a cumulative drop of over 4%.

Some analysts on Wall Street believe that the two notable oil price increases since the 21st century have led to declines or bear markets in U.S. stocks, and this time may yield the same result. In this situation, high-risk assets like tech stocks such as Nvidia face challenges but may also attract safe-haven funds, while defensive assets become the most advantageous investment projects.

1

U.S. Reinforcements, Iran Stands Firm

On Wednesday evening, President Trump told Republican members of Congress that Iran is eager to reach an agreement to end nearly a month of hostilities, stating, “They really want to reach an agreement, but they don’t dare to say it.”

Trump’s statement contradicts claims from Iranian state media. Iran’s state television Press TV reported that Tehran is also seeking its own guarantees, including that the U.S. and Israel will not resume attacks, war reparations, and recognition of its sovereignty over the Strait of Hormuz.

With just two days left until Trump’s set deadline for ending the war on Friday, the progress of negotiations and the likelihood of reaching an agreement remain in question.

Iran has effectively blocked the Strait of Hormuz, which is a crucial transportation route for about one-fifth of the world’s oil and liquefied natural gas, causing global supply shocks.

The conflict has led to soaring prices for fuel and fertilizers, with commercial tankers avoiding transit through the Strait of Hormuz, and Iranian attacks have also damaged energy infrastructure. Furthermore, the conflict has raised concerns about an inflation crisis and global food shortages.

According to informed sources, Tehran has begun charging a toll for a limited number of merchant ships passing through this important waterway, with fees for each voyage reaching up to $2 million, depending on the circumstances.

Meanwhile, the war may further escalate. The White House has also claimed that Trump retains all options for further military action. Washington has ordered additional troops to the region, with some units expected to arrive by this weekend.

2

Rising Energy Costs Often Lead to Stock Market Declines

Facing the unresolved situation of the U.S.-Iran war, Wall Street is particularly tense, and the real-time trading data provider Barchart expressed concerns on its official website.

An article from Barchart on Wednesday pointed out that as geopolitical tensions escalate, investors may be witnessing the opening act of a familiar tragedy.

The article noted that in July 2008, oil prices soared to an astonishing $147 per barrel. Just 60 days later, the U.S. stock market began its historic collapse, with the S&P 500 index dropping 50% within eight months.

Given that the Iran conflict erupted on February 28, the historical countdown may be replaying itself.

Although the 2008 financial crisis was primarily triggered by subprime mortgages in real estate, record oil prices ultimately imposed an unbearable burden on the global economy. When oil prices reach levels that consumers cannot bear, large-scale economic adjustments become inevitable.

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Similarly, prior to the current Iran conflict, oil prices surged significantly in 2022. Influenced by energy shocks, the market experienced a prolonged bear market lasting over a year.

There is a clear negative correlation between the S&P 500 index and crude oil futures prices: as energy costs rise, the market tends to fall.

3

Larger Shocks May Be Ahead

Why do oil prices exert such significant pressure on the stock market? Ultimately, it relates to fundamental liquidity and consumer behavior. When energy prices rise and living costs soar, consumers require more funds to cover daily expenses. To adapt, many are forced to sell investments to free up cash to cope with rising prices at the gas station and in the supply chain.

Barchart states that while the current decline in U.S. stocks is not as severe as in 2008 and 2022, this crisis has only been ongoing for about a month, and the recent downturn may indicate that larger shocks are on the horizon.

However, it is objectively clear that the bear market in 2022 was driven by a combination of factors, including high inflation, aggressive interest rate hikes by central banks, and severe supply chain constraints. The current situation is more complex. Inflation in the U.S. has eased, and interest rates are below the peak levels of 2022. Additionally, while the Strait of Hormuz has effectively closed to vessels supporting specific factions, there has not been a systemic collapse in the broader global market as seen in past crises.

Barchart notes that if history follows the 60-day pattern established in 2008, the window for a significant market correction is narrowing, with only about 30 days remaining. Investors must now assess whether the current market decline is merely a temporary pullback or the onset of a prolonged bear market triggered by global conflict.

Similarly, Charles Schwab’s website published an article on March 13 stating that the Iran war has evolved from a geopolitical event into a global energy supply shock. The longer the disruption to energy and commodity supplies persists, the more severe the negative impact on economic and financial conditions may become. Asia appears to be the most vulnerable, while Europe also faces considerable risks.

Even if military action ends, the market may rebound, but the performance of international developed and emerging market stocks may struggle to recover. Even if the conflict ends quickly, economic and financial pressures may persist for the next 6 to 12 months, making it difficult for the stock market to recover.

4

AI Stocks May Remain Strong

In terms of specific stock selections, Barchart believes that due to rising energy costs and global risks increasing uncertainty in market prospects, U.S. stocks reliant on stability and long-term growth, such as tech stocks and artificial intelligence (AI) stocks, are under pressure, while high-growth stocks are declining.

Trump indicated that negotiations with Iran are underway, suggesting a possible agreement, which has begun to soothe the market. A potential U.S.-Iran agreement could fundamentally change investors’ investment direction, with Wolfe Research believing this could be a significant boost for AI companies like Nvidia (NVDA). Analyst Chris Senyek pointed out that as Trump softens his stance on striking Iranian energy infrastructure, oil prices drop and stock markets rise, indicating that the market is very sensitive to easing tensions.

If this trend continues, analysts expect investors to return to risk assets, especially AI-driven stocks. As market confidence recovers, these stocks are expected to see strong inflows. Senyek also believes that global capital will flow back to large U.S. tech companies, which continue to show robust growth and more attractive valuations.

Similarly, Goldman Sachs believes that the economic drag caused by the war could create conditions for mega-scale data center operators—Alphabet (GOOG), Microsoft (MSFT), Amazon (AMZN), and Meta (META)—to regain leadership in the AI sector.

Since the end of last year, tech giants have faced pressure from uncertainty regarding the returns on their massive AI investments, but the robust balance sheets and healthy business conditions of mega-scale data center operators may keep their stocks attractive during periods of economic slowdown.

5

Defensive Assets May Withstand the Test

Mike Coop, Chief Investment Officer for Europe, the Middle East, and Africa at Morningstar, shared insights on where investors can seek returns.

In the early stages of the war, energy futures and energy stocks performed well, as rising oil and gas prices directly translated into profits. Coop stated that unless company facilities suffer direct losses, this trend seems likely to continue. However, he also cautioned that it may be “a bit late” to buy such assets now.

Therefore, he emphasized the importance of diversifying investments across different assets and currencies, especially for risk-averse investors. “Defensive assets are what can withstand the test,” he said.

Defensive assets typically include government bonds, certain stocks (such as consumer staples, utilities, and healthcare stocks), and safe-haven assets like gold.

Goldman Sachs’ judgment aligns with Coop’s, recommending an overweight in healthcare and materials sectors but “no longer recommending stocks related to middle-income consumers or non-residential construction.” It is expected that middle- and low-income consumers will be impacted by rising gasoline prices, while non-residential construction may be affected by rising energy and transportation costs and increased economic uncertainty.

Healthcare, as a basic service, can provide investors with protection against the impact of a slowdown in non-essential spending. Goldman Sachs noted that during past oil crises, the healthcare sector performed best, exceeding the market by 1.5 percentage points, even outperforming the energy sector, which directly benefited from rising oil prices.

Goldman Sachs also believes that the Iran war could uplift market sentiment for solar and cybersecurity stocks, both of which have recently faced adverse factors. The Trump administration significantly cut federal support for renewable energy; meanwhile, concerns about disruptive changes in the AI-driven software industry have also severely impacted cybersecurity stocks.

Rising oil and gas prices may prompt AI data center developers to increase their demand for renewable energy, and Goldman Sachs estimates that this brings potential upside for solar stocks, although it has not yet been reflected in stock prices. Goldman Sachs believes that cybersecurity stocks may benefit from their relative insensitivity to the economic cycle and from the growing cyber threat from Iran.