Tensions surrounding Iran have escalated following new developments. Iran's Supreme National Security Council issued a statement in the early hours of the 18th, confirming that its secretary, Ali Larijani, was killed in an airstrike.
According to reports, the U.S. Central Command announced that several hours earlier, American forces successfully used multiple 5,000-pound deep-penetration munitions to destroy reinforced missile launch sites operated by Iran along the coast near the Strait of Hormuz. The U.S. military stated that anti-ship cruise missiles stationed at these sites posed a threat to international shipping in the strait. Iran has not yet responded to the attack.
Additionally, on the 17th, the Speaker of Iran's Islamic Consultative Assembly, Mohammad Bagher Ghalibaf, stated on social media that the Strait of Hormuz will not return to its pre-conflict state. French President Emmanuel Macron indicated that France would participate in escort operations in the strait once the situation becomes "calmer."
U.S. President Donald Trump again expressed dissatisfaction on the 17th with NATO allies for not joining the U.S.-proposed escort mission in the Strait of Hormuz, stating that he was "disappointed" with NATO. Trump claimed it would "not be long" before the strait could be safely navigated. He also noted that the U.S. is not yet ready to end the conflict with Iran but expects to withdraw "in the near future."
Reports indicate that the Pentagon is deploying additional troops to the Middle East, with the USS Tripoli, an amphibious assault ship stationed in Japan, currently en route to the region.
On Tuesday, the three major U.S. stock indices experienced a rally followed by a pullback. By the close, the Dow Jones Industrial Average had edged up 0.10% after rising nearly 1% during the session. The Nasdaq and S&P 500 gained 0.47% and 0.25%, respectively. Large-cap technology stocks showed mixed performance, with Google and Amazon rising over 1%, while Nvidia and Facebook fell 0.70% and 0.76%. Chip stocks also diverged, with Micron Technology climbing over 4%, Qualcomm up 1.70%, and Intel declining nearly 4%.
Notably, the situation in Iran has dampened sentiment among U.S. retail investors. A recent J.P. Morgan report indicated that as tensions with Iran intensified, retail investors ended their previous pattern of buying on market dips, showing signs of sustained fatigue. During the week of March 5–11, weekly purchases by U.S. retail investors plummeted nearly 30% compared to the previous week. Concurrently, net inflows into retail ETFs fell by 22%, halting a three-month trend of consistent buying.
In related news, Iran's Supreme National Security Council confirmed in a statement that Secretary Ali Larijani was killed in an airstrike. Iranian media reported that Larijani died on the morning of the 17th, along with his son Morteza Larijani, deputy security affairs official Alireza Bayat, and several aides.
The statement emphasized Larijani's dedication to Iran's development and called for national unity in the face of external threats. It also noted that the incident would strengthen Iran's resolve to continue on the "path of resistance."
The Israeli Defense Forces claimed responsibility for the airstrike near Tehran, describing Larijani as one of Iran's most senior leaders and a close associate of the late Supreme Leader Khamenei. Following Khamenei's death in a U.S.-Israeli airstrike on February 28, Larijani was said to have led military operations against Israel and the U.S.
Meanwhile, Iran's new Supreme Leader, Mojtaba Khamenei, affirmed in his first statement that Iran would continue to block the Strait of Hormuz. The Islamic Revolutionary Guard Corps has repeatedly stated that the strait is under its strict control and that the U.S. and its allies have no right of passage.
President Trump reiterated his criticism of NATO allies during a meeting with the Irish Prime Minister, calling the alliance's stance "a very stupid mistake." He suggested that NATO's reluctance to support the U.S. in the Strait of Hormuz was a test of the alliance's reliability, adding that the U.S. had spent "trillions of dollars" on NATO, contributing to its fiscal deficit.
Trump asserted that it would not be long before the strait is safe for navigation but clarified that the U.S. has no immediate plans to reconsider its relationship with NATO.
The conflict between the U.S., Israel, and Iran, which began with large-scale military actions on February 28, has nearly halted shipping through the Strait of Hormuz. Trump has repeatedly urged European and other allies to join escort missions, expressing frustration over their reluctance.
The European Union's High Representative for Foreign Affairs, Josep Borrell, stated on the 16th that the conflict is "not Europe's war" and that EU members have no intention of extending their naval escort operations in the Red Sea and Gulf to the Strait of Hormuz.
The outbreak of hostilities with Iran has disrupted U.S. retail investors' long-standing habit of buying during market declines. A J.P. Morgan team led by quantitative strategist Arun Jain noted in a report that retail investors showed signs of persistent weakness for the first time this year, with weekly purchases dropping about 30% week-over-week. This followed a record-high monthly buying volume in February.
During the week of March 5–11, net inflows into ETFs fell by 22%, breaking a three-month trend of consistent purchases. Total retail inflows dropped to $6.7 billion, below the 12-month average of $7.1 billion per week. ETFs remained favored, attracting $6.3 billion, while individual stocks saw only $400 million in inflows.
J.P. Morgan observed that retail investors are reducing purchases of both ETFs and individual stocks, with the latter adding pressure to already modest flows over the past two to three weeks. A significant sell-off on Wall Street earlier in the month marked the largest single-day net selling of individual stocks in a month.
Despite the overall reduction in positioning, retail investors showed a clear preference for large-cap tech stocks with strong earnings reports, such as Oracle, while reducing exposure to energy stocks. Last week, they continued buying tech and consumer discretionary names, including Nvidia, Broadcom, Oracle, Microsoft, Tesla, and PLTR.
This behavior resembles patterns seen during the early weeks of the Russia-Ukraine conflict in 2022, where investors initially bought energy stocks and ETFs, briefly turned negative, and resumed net buying as the situation evolved. Oil prices climbed to nearly $120 per barrel recently amid escalating Middle East tensions.
Data from J.P. Morgan indicate that retail investors have been buying defensive stocks like aerospace and airline companies while net selling sectors such as financials, healthcare, communications, and materials.
The United States Oil Fund (USO), which tracks W&T Offshore crude prices, has gained popularity, while the Energy Select Sector SPDR Fund (XLE) has seen outflows.
Caution remains elevated in certain market segments. Nomura cross-asset strategist Charlie McElligott noted that options traders linked to large-cap tech stocks and Nasdaq 100-tracking ETFs appear to be preparing for a "disaster," creating a lopsided trading landscape that may present opportunities for bold investors.
Retail investors have become a significant force in the market since the 2020 pandemic, when many were confined to their homes. Scott Rubner, head of equity and derivatives strategy at Citadel Securities, recently described retail investors as "the strongest participants in the equity market," citing record activity in January. Although February flows were lower, they still marked the fifth-highest net buying month on record and the strongest in five years.
Comments