By John Towfighi, CNN
A Brent crude oil price chart displayed on a mobile screen (photo illustration).
Photo: AFP / Jonathan Raa / NurPhoto
Analysis – Stocks have climbed, bond yields have fallen and the US dollar has weakened across President Donald Trump’s second term so far – market movements the president has welcomed.
But the war with Iran is threatening to disrupt that, sending stocks lower and pushing yields and the dollar higher.
That complicates the narrative for a president who prides himself on record-high stocks, low borrowing costs and a weaker dollar for boosting manufacturing. And with a razor-thin Republican majority in the House of Representatives at stake, that could make Trump’s pitch to midterm voters a harder sell.
The longer the conflict goes, the longer stocks, bonds and the dollar could all trade in exactly the opposite way Trump wants.
Stocks
Trump often touted record-high stocks before the war, as when the Dow hit 50,000 points last month. He’s frequently referred to the market’s strength as evidence of his presidency’s success.
“The stock market has done so well, setting all those records – your 401(k)s are way up,” Trump said during his State of the Union address on 24 February.
But the Dow has dropped more than 5 percent since its latest record high on 10 February, as investors worry about global oil flows because of the war.
“The conflict in the Middle East and related headlines are still the major source of fluctuations in markets,” Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, said in an email.
Samana said he thinks the conflict will last weeks or a few months and not meaningfully change the outlook for stocks. The key is time: The longer the conflict rages, the more market uncertainty there will be.
The S&P 500 is down 1.5 percent this month – enough to put the index into the red for the year. And it’s been six weeks since the S&P hit a record high.
“It really comes back to the duration. How long is this going to take?” said Mike Skordeles, head of US economics at Truist.
Donald Trump.
Photo: AFP / Brendan Smialowski
Bonds
The key 10-year US Treasury yield has climbed since the war with Iran began as investors, worried higher oil prices will boost inflation, sell bonds. The 10-year US Treasury yield rose from 3.96 percent at the start of the month to 4.22 percent as of Wednesday.
Yields, which rise when bond prices fall, influence borrowing costs across the economy, including mortgage rates.
In the past, the market has served as a check on the White House. The president has backed off policy proposals like tariffs when they rocked the stock and bond markets simultaneously.
The Trump administration has said it is focused on lowering Treasury yields to address affordability as well as to lower interest payments the US government owes on the national debt.
The 10-year yield is only at its highest level in a month. But the yield’s climb last week was its largest weekly leap since April, when markets were jolted by massive tariff uncertainty.
Resurgent inflation because of energy prices could also make the Federal Reserve less likely to cut interest rates, at odds with the president’s preference for lower rates.
US dollar
A weaker dollar can make US goods cheaper for other countries, serving as a tailwind for domestic manufacturing and boosting exports. That aligns with the Trump administration’s goal of reviving American manufacturing.
But the war with Iran has sent the dollar rebounding. The US dollar index has climbed 1.7 percent this month as investors flock to safe havens and as analysts see fewer Fed interest rate cuts ahead.
Treasury Secretary Scott Bessent said in January that the United States has a strong dollar policy. But a rising dollar is at odds with the White House’s hoped-for manufacturing renaissance.
Before the war, the dollar index was down 0.7 percent in 2026 after falling 9 percent in 2025.
The index is now up nearly 1 percent this year, though it is still down 4.6 percent since this time last year. (The index measures the dollar against a basket of major currencies.)
Rising Treasury yields complicate the Trump administration’s push for lower borrowing costs. A stronger dollar impedes visions of trading partners scooping up cheaper American goods. And lower stocks conflict with the president’s love of record highs. Whether these moves continue depends on the price of oil and the duration of the conflict.
“There’s just going to be more headline risk in the market, more choppiness, until there’s more details on the timeline here,” said Adam Turnquist, chief technical strategist at LPL Financial.
– CNN