By Martin Baccardax
Wall Street looked set for a wild end to the second week of trading since the start of the Iran war, with oil trading near $100, stocks stuck at their lowest levels in three months, and volatility gauges pointing to triple-digit swings for the S&P 500.
The benchmark S&P 500 has given back around 3% since the first wave of U.S.-led attacks on Feb. 28, and now sits around 4.7% south of the all-time high it reached in late January.
The Cboe Group's VIX index, also known as Wall Street's "fear gauge," rose more than 11% in the overnight session to around 27, a level that suggests options traders expect daily swings of around 1.7%, or 113 points for the S&P 500, over the coming month.
A rise past 30 on the VIX, meanwhile, would signal extreme stress in the world's biggest benchmark. It peaked at around 52.3 during last April's "Liberation Day" tariff chaos.
Markets beyond the headline stock indexes were bracing for big moves, as well, with a gauge of Treasury volatility pegged at the highest levels in nine months.
Benchmark 1 0-year note yields have surged nearly 30 basis points since the war began and were last changing hands at 4.271%, while 2-year notes have risensome 35 basis points to 3.749%.
Rate traders, meanwhile, have sharply pared bets on near-term support from the Federal Reserve, and are now pricing in the first quarter-point reduction in September, two months past their prior forecasts. The PCE inflation report, to be released Friday, isn't likely to change that, either, given the data was collected long before the U.S.-led attacks.
Ed Yardeni, founder and president of Yardeni Research, suggested the readings indicate how investors are calibrating the economic impact of the Persian Gulf conflict.
"The stock market may be starting to discount the possibility that the war won't be short and that the Strait of Hormuz may remain effectively closed for some time," he said. "The bond market markets are starting to discount that the war might be stagflationary."
Oil remains the key market lynchpin, with Brent crude closing past $100 a barrel for the first time since 2022 last night, extending the global pricing benchmark's two-week advance to around 65%. Brent futures contracts for April delivery were trading at $98.82 a barrel.
ING's global head of markets, Chris Turner, noted that oil traders are pricing in only a 44% chance that the Strait of Hormuz, which handles a fifth of the world's energy supply traffic, will be operating normally by April 30. Last week, that figure was around 79%.
Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, said Bloomberg data indicate a three-month closure of the Strait could take crude prices as high as $164 a barrel, surpassing the all-time peak of $147 recorded during the Global Financial Crisis.
That's feeding into a notable advance for the U.S. dollar index, which has gained 2.6% against a basket of its global currency peers since the conflict began and has been trading near the highest levels in six months.
"We cannot see investors wanting to fight this dollar rally, given there is so little certainty as to when this crisis will end. And traders, once again on a Friday, will not want to run any short dollar balances ahead of the weekend event risk," Turner said.
That desire to remain neutral, or at the very least protected, heading into the weekend, and a stark warning from President Donald Trump to "watch what happens" when the U.S. uses its "unparalleled firepower, unlimited ammunition, and plenty of time" is playing out in options markets as well.
"Shorter-term [VIX] measures remain elevated, showing investors are still paying up for near-term protection rather than assuming volatility will fade quickly," Saxo Bank strategists noted. "Looking at the options chain for today's expiry, the pattern suggests investors remain cautious and continue to prioritize portfolio protection."
It's also worth noting that it's Friday the 13th, a day steeped in Wall Street lore going back to a titular best-seller, written by the infamous stock manipulator Thomas Lawson in 1907 about a corrupt broker who crashes the market.
Let's hope that remains in the realm of fiction.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 13, 2026 07:25 ET (11:25 GMT)
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