As my climbing buddy and I emerged from the safety of the below-treeline windshield, we were harshly greeted by 80 MPH winds hurling tiny ice particles straight into our unprotected eyes, preventing even a peak in the direction we hoped to advance! A quick retreat to “goggle up” allowed us to get through the “flying-ice wind tunnel”, but trouble on the descent hours later affirmed we should have listened more intently to the mountain’s early warning that day. While concerning developments relating to the Iran War are not a cause to blindly sell stocks and other risky assets, they are warnings to be observed and weighed in our quest to remain mindful of Warren Buffett’s well-known principle to prioritize avoiding permanent loss of capital. Consider the uncertainties the Iran Conflict presents to the investing landscape:
The Context
- In the last 150 years stock valuations1 have been higher than today four times, all of which were brief excursions.2 The context is that stocks are expensive today.
- The 2/10 Yield Curve, regarded by many to be amongst the most reliable recession indicators, was deeply inverted for over two years and turned positive just 18 months ago.3 This is well within the boundary of time in this historical relationship,4 and it would be highly unusual if such an inversion is not followed by recession.
- Priced into today’s stock valuations is the expectation of two more rate cuts this year, nearly mandated by President Trump. Were that not to happen, a revaluation of equities would likely occur.
- Today’s global economy runs on two essential things: debt and energy. A lasting disruption in either of these will likely lead to recession, or worse.
Iran Conflict-Related Developments
- A significant reduction in global oil shipments due to Iran bombing tankers passing through the Strait of Hormuz has introduced an energy supply shock. Refineries in the region are shutting down, and due to the time required to resume operations the resulting spike in oil prices may last long enough to invigorate inflation in the second half of 2026.5
- Rising inflation means the Fed may either follow through on its promise to cut rates and repeat the 2021 error of unintentionally stoking already warm inflation, or disappoint the market by not cutting rates. Either scenario could create headwinds for stock prices
- There is trouble brewing in the credit market as a (so far) quiet ‘run’ takes place in the Private Credit and Equity markets due to illiquidity concerns. Redemption requests amongst Non-Traded Business Development Companies surged over 5-fold in Q1 (over Q1 2025), and Blackrock, the world’s largest asset manager, is limiting redemptions. Stansberry Research reports that “concerns about private credit are starting to trickle into the broader credit market”.6
A supply shock in energy coupled with a disruption in the credit (debt) market as inflation threats emerge and while stocks are priced to perfection, is a setup that should have our attention. Use your tools, not your emotions to navigate the terrain. Think about it, and may God bless your asset protection efforts!
Shaun
“The prudent sees danger and hides himself, but the simple go on and suffer for it” ~Proverbs 22:3
“Rule #1 is, NEVER LOSE MONEY; Rule #2 is, NEVER FORGET RULE #1” ~Warren Buffet
1 As measured by the average price to earnings (P/E) ratio of the S&P 500 Index
2 LT Charts, S&P 500 P/E Ratio, December 1870 – November 2025
https://www.longtermtrends.com/sp500-price-earnings-shiller-pe-ratio/
3 Y Charts, “10-2 Year Treasury Yield Spread”, 5 Year Chart
https://ycharts.com/indicators/10_2_year_treasury_yield_spread
4 Brighton Jones, “Time to Worry? What an Inverted Yield Curve Does and Doesn’t Mean”, March 27, 2019
https://www.brightonjones.com/blog/inverted-yield-curve/
5 Presentation at FPA Luncheon, March 11, 2026, Harbor Capital
6 Stansberry Research, The Stansberry Digest, “A Rush for the Exits has Begun”, March 10, 2026
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This commentary is provided for informational and educational purposes only and is not intended as investment advice or a recommendation to buy or sell any security or adopt any particular investment strategy. The views expressed are those of the author as of the date of publication and are subject to change without notice.
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