The Dividend Cafe - Iran, Oil, and Markets

Episode Date: March 6, 2026

Today's Post - https://bahnsen.co/46HCMXH From Nashville, Dividend Cafe host David Bahnsen discusses investor implications of the U.S. military operation that began in Iran, emphasizing the discomfort of analyzing markets amid potential casualties. He notes the Dow is down about 3% on the week but highlights extreme intraday volatility as a sign of uncertainty rather than news-driven moves. Bahnsen argues the key market driver is oil: WTI has surged into the 90s, up over 32% in a week, while futures show backwardation implying a temporary shock. He cites knock-on effects including higher shipping costs, sidelined container ships in the Persian Gulf, and aluminum at four-year highs. Political ramifications could affect markets via midterm outcomes. He advises investors not to change asset allocation or trade the “fog of war,” expecting volatility to persist while focusing on long-term dividend compounding. 00:00 Welcome From Nashville 01:01 War And Investor Lens 02:54 Market Drop Versus Volatility 06:45 Fog Of War Uncertainty 09:24 Oil Shock And Backwardation 11:26 Shipping Metals And Gas 15:09 Political Ripple Effects 18:16 What Investors Should Do 20:04 Closing Thoughts And Prayer Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Well, hello and welcome to the Dividend Cafe. I'm your host, David Bonson. I'm recording from our beautiful office here in downtown Nashville, Tennessee, where I'll be leaving shortly. I've got to spend the last couple of days here. I had some wonderful times with clients here and now heading off to the next city. on what is a little whirlwind of a week, and we'll get back into New York on Tuesday night. And there's a lot going on right now in markets. There's a lot going on in energy and a lot going on in the world. And we're going to dedicate our time today to those things as it pertains to the military operation that began in Iran last weekend. The kind of major takeaways for investors and how we're thinking about what is going on and our expectations around all of this. The noise and the legitimate news elements of where things stand as it particularly

pertains to investors. That's what I want to get into here in the Dividend Cafe. It's a sobering discussion and frankly a little bit uncomfortable because Dividend Cafe exists to talk to investors about financial ramifications, about policy issues that matter to markets, to the economy, and war is fundamentally something that is obviously life-threatening. And so there's this human life element. And when casualties are a reality or a possibility or both, and I'm sitting here talking about what it means to investor or financial return expectations, it's uncomfortable.

But I also know what the objective of Diven Cafe is, and I need to stay in that lane and at the same time do my very best to provide a useful framework for how to think about these things. One of the elements I would say, because I'm going to move on now, taking for granted that you understand where my priorities really lie, and yet there's a kind of division of labor the way we think about this. But my genuine heart is with the preservation of human life and ending to this and certainly American interest and the things that should matter for a patriotic person who believes in the dignity of human life. And yet at the same time, when I think about how this impacts folks who we are responsible to manage money for, there's a framework

that I would like to suggest to you that, first of all, right now, requires a differentiation between all the things in this that will prove to matter, what economic impact. We're going to talk in a moment about potential political impact, where there could be a more long-term reality that gets embedded in this, versus what has clearly been the trend here in the first five days since all of this broke out.

As I'm sitting here recording, the Dow is down 700 points. So you're talking about maybe 1,600 points on the week. That's right around 3%, maybe a tad over 3% now. I mean, markets down 3% in a week is bad, but it's not that bad. I mean, it happens a lot. It is most certainly not unheard of, and it has no material impact to any real long-term investor. But what I think is a little more interesting that I want to be able to explain as a dynamic

that is more real right now than where we're going is in this immediacy the enhanced obvious volatility that it represents. So consider the following that Monday of this week, the Dow was down 600 points at one point and closed basically even on the day. Tuesday, we were down almost 1,300 points at one point, closed down 400, but basically, and from the low point to the high point, was up about almost 1,100 points. So just massive intraday volatility up and down. Wednesday, we were down 150 at one point, but we closed up 240 points on the day, and there was a 500 point swing intraday, and that was the least volatile day of the week. Then on Thursday, we were down another 1,200 points at one point. We closed down 785. It was the worst day of the week unless Friday ends up being so.

And there was a thousand point swing between the low point and the high point. Earlier today, we were down 950 points. As I mentioned right now, we're down about 600. So I hope you get the idea. These intraday swings are substantial. And when markets start moving up and down, a thousand points intraday. There is absolutely no explanation for it other than you have a touchy market. This is not, oh, there was news that caused us to go down this. And then other news came and caused us to go up this. It is not in response to news or anything substantive. It is temperamental. And it's totally understandable or human or what have you. I happen to think it's incredibly ill-advisable for sober-minded investors, but needless to say, this is not about, we're worried about A,

but then B came up. The high volatility is because no one knows what A, B, C, or D is to be quite candid. And so I would not recommend taking investment advice from somebody trying to trade in and out of these things in the fog of war and in the heightened volatility that we're clearly in. There will be outcomes. that come from this. Right now, there are known categories that have unknown outcomes. There are unknown categories that have unknown outcomes, but there will end up being known knowns at some point, and this is from the language of vernacular that Donald Rumsfeld famously utilized. I think that it should not matter to you one bit, this intraday volatility, that recognizing that there is a

touchingness, an enhanced volatility, whenever there are news-centric reasons for volatility to go higher, and that is at a starting point of high valuations, it can become even more sensitive. But needless to say, there is not anything to be done about it in terms of trading around it. The most important question that is going to dictate where we go beyond from a Thursday to a Friday type of timeline is how long this plays out. And I think one of the reasons it's so ridiculous to form a market thesis about that is that there is no war thesis for it right now, that nobody has a legitimate take on where the current war effort is going.

Now, if you are listening now and you are a Pentagon inside. with maximum security clearance, well, I suppose maybe you know something, but I don't believe you listening right now are in a position to know. And I know that myself offering this commentary, I'm not in a position to know exactly where things are going to go. There are knock-on effects to the market from the regional instability that the effort has created with the ports, with the straight of her moves, with shipping, with production of oil and gas in the region, with various trade expectations. And some of these things may be cured much quicker than others.

Some may take longer, but it is very difficult to endgame where this goes. And for one thing, we don't really even know what Iran's ability to resist this is. There's reason to believe that depleted. munitions, decimated leadership may very well create an ending sooner than later, but that doesn't necessarily mean it's an ending that ends up being very favorable. There could be civil war, ongoing unrest. There's a lot of unknowns around it, and markets do not like uncertainty, and the way they respond uncertainty is not to go straight down. It is to become very volatile and therefore create a lot of inconvenience for those trying to skateboard around the

freeway, if you will. Realistically, I do believe the United States has an objective to get to a point of declaration of success. And I do believe they will desire to see new leaders in Iran. They're most certainly going to get that. We don't know who or what at this time. But since the other leaders are all dead, I'm quite positive. There's going to end up being new leaders. And I think that the American interest is for all this to happen with this little damage to American life and American economic interests.

as possible. The path to that is murky right now, but I would not bet against that end outcome. The issue, though, as we look at equity market response day by day, is very much a byproduct of oil prices. That oil prices become something that bleed into the real economy. When you get a supply shock and say, okay, we can't get production out of a certain part of the Middle East, or we can't get oil shipping out of, in this case, the Strait of Ramoos, the Persian Gulf is not going to be able to deliver a certain marginal amount that the global supplies rely on. Then it does push things up. When I was talking to you on the Diven Cafe on Friday, we were up a whopping 5.5% Monday,

which is real small ball for a war in the Middle East breaking out. As I gave a talk at a client dinner event last night, on the week, oil was up about 17%. That's a lot more than five and a half. It's still not earth-shattering. As I'm talking right now, we're up about nine and a half percent on the day. We're now into the 90s with WTI, and so you're up over 32 percent in the last week. Well, that's a big deal. Now, it isn't going to last.

There will be a time at which these supply shocks come off, and then there is a recalibration. And that gets evidenced in what, and I'll ask the guys to put up on the screen, now, our chart of the week is showing you the backwardation in oil prices, where they've gone way up on the short end, but they're actually much lower going out nine months and 12 months. And so what markets have done is price something in that properly captures the short-term impact, but is by no means expecting this to last. But the longer things go, the more of an impact that ends up getting embedded and the more that economic impact gets felt in the form of higher gas prices, higher shipping prices, and higher potential prices on goods.

So when I talk about shipping costs, they're up 7% on the week, and that's not huge. It's also 7% up from what had been a pretty low price level. But again, when you have a global player like Maers, the Big Danish shipping company, is considered sort of a global bellwether on shipping, basically having to take offline two major shipping services from the Middle East to Europe and Asia. It's only two routes, and they are calling it precautionary at this point. But there's a story there. And is it a four-day story or a four-month story?

You can understand why the inability to answer those questions gives market skittishness. I think that the Strait of Hormuz has been talked about is this thing pushing oil prices higher, but the reality is there's 147 container ships that are basically sidelined in the Persian Gulf right now. They're not going anywhere. They're not doing anything. And that's a lot of cargo, not moving, and that's pushing up price levels elsewhere. 10% of all global aluminum supply comes out of the Middle East. And I'm thankful my friend Peter Bukvar for writing about this week because you see aluminum might not have four-year highs.

Well, that's not all from this week. They were already higher because of tariffs. And then this happened and it pushed it higher still. So we'll put a price up, excuse me, a chart up now on aluminum. But those new highs well above anything that we've seen besides a brief Ukraine spike back, back when that war started over four years ago, certainly the highest now since that period. So four years, that ends up. getting felt through other elements of the economy, where aluminum is obviously a very significant

input. The gas prices so far higher, not to a point yet where I think it becomes hugely problematic, but it all depends on how much higher they go from here. 20 cents a gallon moves the needle. It changes narrative, a little bit. It changes talking point. But 50 cents a gallon, which I would imagine we're headed due, becomes a more real issue. A dollar a gallon becomes a big, deal. And then those things staying on for more than a week becomes a bigger deal in consumer spending, in margins, and not just in how we think about it filling up the tank of our cars, but in how they impact overall transportation and shipping. The gas prices are a major input into the way in which the whole economy functions. So I think when you talk about oil prices, and that point I made a

moment ago about backwardation, you can look at a 32% spike in a week and look at what the short-term economic impact negatively will be. But is there a scenario? I am not predicting this, but I am not taking it off the board either. Is there a scenario in which there's a different regime or different leadership in Iran on the other side of this that is more U.S. friendly or that there's some arrangement worked out where Iran comes on to world markets with more in a post-sanctioned world of global supply than they were in the sanctions environment. And that puts a big downward pressure on oil prices. So we don't only want to think about this in the next 12 days or even 12 weeks, but in the next

12 to 18 months. And futures markets are actually indicating that that is very likely to happen. So not necessarily that particular geopolitical outcome, but that result in commodity prices. The tangential element of market impact I want to bring up is more political. I would not mention this if it were just simply, hey, this war is either going to end up being popular, unpopular, it's either going to help President Trump or hurt President Trump. All that goes without saying, but I don't really care about that very much. I genuinely don't.

I do wonder, though, if there's a sense in which it becomes tangentially important to markets, if it moves the needle on the Senate, if it moves the needle on the midterms. And that is a two-directional comment, a bi-directional comment I'm making. People can say, well, look, the polling so far indicates this isn't very popular. There's economic concerns out there. We saw a really, really bad jobs report this morning. So we're thinking about all of this in a negative context. That may be the base narrative.

It may be the way it all plays out. But is there a scenario where there is a particular, decisive, and reasonably successful outcome that moves this the other way? very quickly, there's absolutely that scenario, that possibility. So there is a bi-directional possibility of political outcome, and you could wait what you think is more probable however you want. My point is that the political outcome of this could end up being relevant to markets just simply as it ends up bleeding into committees, mandates, legislative opportunities, and so forth. Okay, where do we go from here. I am not going to pontificate on the military strategic elements that are far

outside of my skill set. I can share basic data with you. I have a very hard time with people that I happen to know, don't know anything about the real geopolitics of this or the kind of military analysis that are waxing and waning as if they are General Schwartzkoff in 1991. This is far outside my lane, and I'm aware it's far outside my lane. As a basic matter of raw data, we do know that Iran launched 350 ballistic missiles on day one of this, and they launched another 175 on day two. The last two days, they've launched 15 and 28. Does that mean that they're running out of munitions, that they're running out of supplies?

Maybe it doesn't, but it's a data point worth considering. They launched over 1,000 drone attacks in the first three days. In the last two days, they launched 40. So I think it's a reasonable expectation that the sophistication size and capability of the combined U.S. and Israeli forces here are going to prevail. but I don't have an ability to say how, when, et cetera, or what lies in store on the other side of such prevailing. I think that the oil prices are clearly a temporal condition, but I don't know if temporary means four days or four months. I would venture to guess it's somewhere in between with a bias towards the shorter than the longer. What ought investors to be doing at this point?

They ought to not be altering their asset allocation strategy. This should go without saying if you had an asset allocation a week ago, two weeks ago, that didn't factor in the possibility of a geopolitical disruption, including Middle Eastern military operations, then you had a bad asset allocation because these things are permanent possibilities that an appropriately allocated portfolio always takes into account. To right now say, I want to overweight energy. after oils up 32% after some of the U.S. producers

have moved the way they have. It is somewhat irrational. Those that happen to already have an overweight position energy going in, I think as you saw in my white paper a couple months ago, you know what my thesis for that was. It was not based on predicting

in Iran war, but it was an economic and fundamental investor case. And I think an overweight position energy has served people well, but it doesn't mean the one on a move into that now after the fact. Investors should be prepared for more day-by-day volatility, but they should not care for it. They should not care about it. Accept it, but don't respond in any way, shape, or form. The length of the conflict will determine much of market direction

from here. That goes without saying. The magnitude of the conflict will also speak to political repercussions. But day by day, week by week, investors who are compounding dividends, through a period like this from real companies, continuing to do what they do, I believe you have a portfolio working by design. Those are the portfolios we believe in. I continue to pray for a very minimal loss of human life as this incident continues.

This operation plays out. And I do continue to say proudly, God bless America. Thanks for listening. Thanks for watching. And thank you for reading. The Dividing Cafe. Have a wonderful weekend. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC.

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