Oil Spikes, Safe Havens Shine, And The Middle East Reorders

March 2, 2026 | Season 8 | Episode 5

We track a fast-moving conflict in Iran, explain how oil shocks and safe-haven flows hit stocks and bonds, and place the turmoil in a century-spanning Middle East context. Then we shift to earnings, jobs data, AI’s pressure on software, utilities’ power surge, airlines, and income strategies.

• war escalation and immediate market impact
• oil spike, gold strength, dollar bid
• 10‑year yield dynamics and inflation risk
• historical arc from 19th century empires to a reordered Middle East
• OPEC supply signals and shipping insurance stress
• earnings slate and February jobs setup
• AI demand for power and utility growth cases
• airline valuation debate amid travel uncertainty
• rethinking 60/40 with annuities and global equities

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** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice. 

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Transcript

War Breaks And Markets React

Alan Eppers 0:00

And now introducing Mr. Keith Lanton.

Safe Havens, Oil, And Treasury Moves

Military Developments And Global Fallout

Inflation Risk Versus Fed Cuts

Middle East In Historical Context

The 21st Century Middle East Reset

Keith Lanton 0:03

Good morning. Today is Monday, March 2nd. First Monday in March, first trading day in March, and obviously this morning there is tremendous amount to talk about with U.S. and Israel beginning operation against Iran and the implications for the U.S., the economy, the world. We will try and touch on all of that. We'll also try and put it into a historical context, what's going on in the Middle East specifically. But first we'll start out this morning with with what's taking place in financial markets because developments are happening quickly. Right now, President Trump is having Defense Secretary Heggseth doing some briefs on the Iran strikes, confirming that a fourth U.S. service member was killed. Our hearts and our prayers go out to those families as well as all the families of service members who are engaged in harm's way at this time. So, within this context here this morning, we are seeing financial markets react to the situation in the Middle East. Equity futures right now are pointing to a open down about 500 points on the Dow, down about 1% on the SP. Stocks here are dropping, , both in the U.S. as well as already we've seen in Europe as the U.S. on an attack on Iran has rattled global markets. We are seeing that flight to safety. Gold is rising and the dollar is rising. Dollar is up about one half of one percent this morning. Interestingly, at the end of last week, we saw the dollar and we saw the U.S. bond market rising somewhat surprisingly given that we had elevated inflation data last week. The producer price index came in stronger than expected, yet we saw the bond market increasing. Perhaps some participants in the market had some indication that there was going to be some potential conflict in the Middle East. who knows, but seems like bond market was ahead of ahead of a lot of the strategists out there. Crude oil this morning is up about eight percent. West Texas Intermediate is around $72 a barrel. Brent crude is up to just about $80 a barrel. That's up about 7-8%. we are seeing lots of volatility and fluctuations in the price of oil. Gold is demonstrating its safe haven status. Gold is up 2%, about 100 well, now it's up a little more than 2%, about $160 an ounce. Silver up more modestly, up about $1.50 this morning. So 10-year Treasury right now is hovering in around 4%. That's up about six basis points. We'll talk about why the 10-year treasury, after being up significantly last week, maybe selling off this morning, despite its safe haven status. So crude is up the most in four years as tanker traffic through the state Straits of Hormuz. That's that narrow waterway in between Iran and the Gulf states. It's about 10 kilometers wide, and traffic there is pretty much halted. Also, a big Saudi Arabian refinery has been hit, also putting pressure on oil prices. President Trump says the bombing campaign against Iran could last for weeks and called on the Iranian leaders to capitulate. The Islamic Republic's chief of security has at this time ruled out negotiations. Travel obviously disrupted in the Middle East and beyond, and that is sending airline stocks meaningfully lower. We are seeing defense stocks moving higher. We had the Supreme Leader, Ayatollah Ali Khamenei, killed, and that has been verified by the Iranian government. And over the weekend we saw President Trump urging the Iranian people to take over their government when the attacks are finished. UK, France, and Germany are considering working with Middle East allies to launch strikes at Iranian missiles, according to the Wall Street Journal. Half of Iranian missile launchers have been destroyed, New York Times reporting that. Saudi Arabia and the United Arab Emirates could start targeting missiles and drone launch sites inside Iran, according to the Wall Street Journal. Times is saying that commercial ship traffic through the Straits of Hormuz down 70%. The House will vote this week on a resolution to limit presidential war powers. That resolution could fail because of opposition from Democrats and some Republicans. Qatar has stopped liquefied natural gas production at the world's top plant after an attack, so we are seeing natural gas prices moving higher. There was a tragic shooting in the United States in Austin, Texas over the weekend. Some speculation that it might be terrorist related. NBC News is reporting that the suspect wore a sweatshirt that said property of ALA. With respect to tariffs, the Trump administration wants to delay litigation on tariff refunds by up to four months. So this morning, the fog of war is really all that matters. Markets not focused on what it was focused on last week, which had to do with artificial intelligence and artificial intelligence disruption and how artificial intelligence may or may not disrupt software stocks. Right now, markets exclusively focused on the Iran war. Of course, the biggest concern is the human toll, especially the innocents who are being put in harm's way. Most financial markets, as I said, have behaved as might be expected after the dramatic weekend, airline stocks down, anything having to do with transportation costs, companies that rely heavily on fuel as well as moving people around, those stocks are down. Gold moving higher, as I mentioned, somewhat of a surprise. We are seeing treasuries rise this morning as well. Morgan Stanley's chief strategist Mike Wilson saying that equities are unlikely to experience a sustained sell-off. Said after similar events in the past, the SP 500 recorded gains in subsequent months. The bear case, he said, is that a persistent rise in oil derails the strengthening business cycle. Citigroup out this morning with a call on the United Kingdom saying that their stock market may hold up relatively well given their exposure to oil companies and military contractors, and Citigroup raising the UK to overweight from underweight. One of the big questions that's swirling is whether or not air power alone can can win this war and potentially bring about any sort of regime change. So let's talk a little bit about the treasury market, 10-year treasury at around 4%, up about six basis points rather than rising as a haven asset. normally would that means rising in price yields falling. Treasuries are under pressure, several possible explanations. The top contender is that the inflationary impact of higher oil prices could create concerns about any future path for Federal Reserve officials to cut interest rates. One of the silver linings here in the United States was that oil and energy prices were falling. So stickier prices would make it harder for the central bank to cut interest rates. Some suggesting that the military action perhaps is already priced into the treasuries coming into this morning, and now with the conflict and the ramifications of the conflict becoming more apparent, it's possible that traders are cons more concerned with with inflation than they are with tr viewing treasuries as a place to put their money in the event of rush to cash. So ultimately, though, if the conflict were to last for an extended period of time and it were to drag down the global economy, that would potentially create more pressure on the Fed to cut rates despite what's going on in oil, because that would offset some of that, and then we could see treasuries pick up in price and come down in in yield. So, taking a look at the Middle East and the Middle East in a broader context, want to sort of go back and try and peel things back even further. Let's take this onion and peel things back and try and look at things in a horse historical context and take a look at what's taking place in the Middle East. And in order to do that, I suggest we go all the way back to the 19th century or the 1800s and look at that from a historical standpoint. And if you go to the 1800s, 19th century, that was a period of time that century was marked by Britain being a superpower, having their commonwealth throughout the world. At the same time, you had the United States in the 1800s just emerging. The United States was resolving its greatest issue since its founding after being able to secure its freedom, and that was the question of slavery, and the United States obviously fought a brutal civil war. But at the conclusion of the Civil War, the United States, after a period of consolidation and reconstruction, emerged stronger, and the United States continued in the 1800s or the 19th century to fulfill its vision or destiny, as many in America would say, its manifest destiny. So, 19th century we saw rise of Britain or the perpetu or the perpetuation or the peak of the British Empire, and and we saw the United States starting to emerge as a as a leader in in the world. Next up, 20th century. Twentieth century we see really it was a century of the US's emergence and a century that was very much focused on the European continent. And the European continent we saw lots of lots of uncertainty with respect to borders and boundaries in the European continent. The 20th century saw the collapse of the Ottoman Empire and the rise of the Prussian or German country in in Europe, and we saw the map of Europe become become up for grabs, so to speak, and we saw what had been in many cases in Europe tribes or or or or municipalities forming into countries, and we basically saw a a lot of conflict as a result of different countries feeling they had entitlements to different areas within Europe. And of course, this led to not only World War I, but World War II. We also, let's go back to the United States here, United States at the start of the 20th century was asserting its strength, U.S. fighting Spain in the Spanish-American War, and the U.S. at the beginning of the 20th century was able to gain control of Puerto Rico, the Philippines, Guam. We had Spain leave the U the Western Hemisphere, relinquishing control of Cuba, and as a result of the Spanish-American War, it was a catalyst for other expansions here in the United States. The United States annexed the Republic of Hawaii during the conflict, during the Spanish-American War, to use it as a mid-Pacific refueling station for the fleet that the U.S. had heading to the Philippines. The U.S. also formally claimed Wake Island in 1899 to serve as a cable station link between Hawaii and Guam. So you can see the United States continuing to secure a territory throughout the throughout the Western Hemisphere and in the Pacific, and we see the conflict and the conflagration taking place in in Europe. We also saw the rise and fall of the Soviet Union and how the ra the map of Europe had shifted and changing changed in the 20th century. And at the conclusion of the 20th century, we had our first real significant U.S. involvement in military conflict in the Middle East, and that was the first Gulf War, which brings us to the 21st century. Many of us expected the 21st century to be about the United States, which it still is, and to be about the United States and China, which is certainly a significant narrative in the rise of Chinese political as well as economic and military power. But I would argue that so far the 21st century has been a century that has been a century about the map of the Middle East. And I think there are some parallels between what's taken place in the Middle East and what took place in Europe in the 20th century, as you had artificial maps drawn up by the powers that be in in Europe that were presiding over the Middle Eastern countries, and in many cases those maps were very arbitrary. You were putting together clans and tribes, and here in the 21st century, those clans and tribes, in many cases put into countries that didn't even necessarily like each other, are are redrawing the geopolitical situation in the Middle East. And of course, the 21st century started in 2001 with the bombing here in the United States of the World Trade Center, and that then led to the U.S. invasion of Afghanistan in 2001. U.S. had troops president in Afghanistan then for 20 years, 2001 and 2021, the Iraq invasion in 2003, U.S. had forces in Iraq until 2011, the situation in Syria, we've had forces in Syria since 2014. And continuing the narrative with the Middle East, of course the situation where Hamas attacked Israel on October 7th, those horrible events back back then, the hostage situation, and then the Israeli reaction to the Hamas attacks and Israel's invasion of the Gaza Strip. And then we had the U.S. and Israel combined for the 12-day campaign to knock out Iran's nuclear weapons, and here we are in late February, early March with the US and Israel combined military action to bring about regime change in in Iran, to neuter their ability to build ballistic and missiles and to have nuclear capabilities. So, 21st century, lots going on in the Middle East, and if you look at what's taken place in each of these individual countries, there has been dramatic and marked change. In Iraq, we've had the elimination of Saddam Hussein and his Ba'athist regime, and we have had the US military go in and go out, as I just mentioned, , of Iraq. We've also had the situation in other countries, for example, in Jordan. Jordan having a new king, King Abdullah II, take the throne in 1999, and then in 2001, Jordan signed a free trade agreement with the U.S., the first of its kind for any Arab country. Moving around the Middle East, lots of countries many of us didn't even know until the 21st century. The United Arab Emirates transformed from a regional oil producer into a global powerhouse of tourism, technology, and diplomacy. The skyline of the United Arab Emirates is is is one of the most ambitious in the world. The largest skyscraper in the world is in Dubai. The Dubai Mall opened in 2008, the Dubai Metro in 2009. The Pope visited the United Arab Emirates in 2019, first Pope to visit the Arabian Peninsula, and then super significantly in 2020, United Arab Emirates signed the Abraham Accords where they normalized relations with Israel. Other countries that we have in the Middle East, Oman, which has mained a reputation as the Switzerland of the Middle East, as a mediator between different political rivals within the Middle East. Oman in 2002 gave the right to vote to all citizens over 21. In 2005, they had their first female minister. Saudi Arabia obviously been a key key ally of the United States, , but the relationship has been contentious at times. Now we have MBS Mohammed bin Salman since 2015. He, as the son of the current king of Saudi Arabia, King Solomon, has taken on lots of initiatives to change Saudi Arabia, some of it controversial. But to give some examples, back in 2000, there were no movie theaters, no cinemas, no concerts in Saudi Arabia. Today Saudi Arabia is a hub for sports, music, and gaming. In 2000, the economy was 100% oil dependent. Today it's 56% of the economy is non-oil. Syria. Take a look at Syria, which has largely been a Hezbollah base going into the turn of the century and has largely been defined by their relations with Iran. And recently we saw change in government in Syria, and cautiously optimistically that hopefully we will see a more pro-Western pro-humanity Syria moving forward. Other countries like Bahrain, which has navigated a complex path from political liberalization to civil unrest, followed by a pivot now towards economic diversification and regional security. Bahrain, another country that signed the Abraham Accords. Morocco also signing the Abraham Accords as well. And of course, Israel, which has transformed over the last 20 years from a country playing defense to a much more offensive posture, Israel becoming one of the world leaders in not only energy as they found liquefied natural gas off of their coast and shores, but also with tremendous investment in technology. Over the course of the last 20-something years, they had a second war with Lebanon. They had, of course, the Hamas invasion that that they then took a significant military action, the beeper operation in in Lebanon and Iran against Hezbollah, as well as as well as working with the United States to degrade the nuclear infrastructure of of Iran. So so many countries, so many events. The main thesis here is that the Middle East is in the midst of a significant transformation. The Middle East has been the focal point of the 21st century in terms of in terms of events taking place and transformation, and what we are seeing today is just one more culmination of what's really been building here for the last twenty five years. So as we as we take a look at the current environment here in the Middle East, we are seeing OPEC stepping up saying that they are going to increase production for oil, as well as we have some concerns that some of the shipping company insurers are currently being very cautious and withdrawing their insurance. So we will keep a close eye on the fallouts there in the Middle East. All right, some other things to look forward to this week besides the events in the Middle East. Let's transition back to financial markets. We have some earnings this week. We have CrowdStrike, Target announcing earnings on Tuesday, followed by Broadcom on Wednesday and Costco on Thursday. The Bureau of Labor Statistics is releasing the jobs report for February. That is taking place on Friday, March 6th. Economists forecast a 60,000 increase in non-farm payrolls after a 130,000 gain in January. Unemployment rate expected to remain at 4.3%. January's job growth was the largest since December of 2004, offsetting some concerns about a weakening labor market. All right, let's transition to Barron's. Let's talk a little bit about last week in the financial markets. Last week, as I mentioned, the markets were very much focused on artificial intelligence and what implications artificial intelligence was going to have, especially as it pertained to software stocks and as it pertained to white-collar jobs, as the concern is that artificial intelligence may be able to replace many certainly at the current moment i introductory or entry-level white-collar jobs, but the concern is that that may expand even further. There was a research report last week that went viral. That was not necessarily a prediction, but a possibility is the way it was put out there, of a dystopian, let's say, 2028, where white-collar jobs were significantly replaced, and the consumer spending, especially for the upper earners, would significantly decline. And this outlook spooked investors so much that even Nvidia's stellar earnings couldn't jumpstart a rally last week. So last week we were in the midst of what some are calling a SAS pocalypse, that's software as a service or software stocks. iShare's software ETF, symbol IGM, Ida Golf Mary, is down 22% year to date. Investors are terrified that hundreds of billions being poured into AI will cannibalize traditional software companies before they pivot. Also in the crosshairs last week were business development companies. Business development companies lend to small firms that banks generally don't lend to anymore as capital rules have changed. And these business development companies are ground zero for the current volatility. These business development companies are the types of companies that are publicly traded, but the private ones are the ones that we've heard a lot about in the news, like Blue Owl. Last week we heard about Apollo, and we heard about some loans that they had made that were underperforming or not performing because of fraud that had been taken place in some of the companies that they have been invested in. Furthermore, there's concerns in the business development company space specifically that they have a lot of exposure to private software companies. So these are software companies that haven't gone public, , may never go public, but nevertheless may be threatened in terms of their future ability to make money and have future cash flows because of artificial intelligence. Therefore, if you're looking at an index of business development companies, they are down about 7% over the past month, and that's despite the fact that they have yields that sometimes range from 10 to 13%. In this Barons article, they say that these business development companies might start to look like value opportunities if if if you can pick the right ones. The ones that Barons suggests looking at are Aries Capital, ARCC. They are seen as a seasoned sector leader with high quality management. Also, Gollup Capital, which symbol is Golf Boy Delta Charlie, yielding around 12%, and it was praised for its reasonable fee structure and diversified portfolio. Barron's also talking significantly about electricity. The headline story on the cover of Barron's talked about the need for electricity and the fact that the fact that artificial intelligence is such a energy suck and is using so much power that it's starting to raise the bills for ordinary Americans based on the fact that the utilities just can't produce enough power. President Trump addressed this in his State of the Union address. And Barron saying that because there has been such a political backlash, that utilities are gaining the upper hand in negotiations with big tech, Alphabet, Amazon, Meta, Oracle, because these firms are desperate for the massive amounts of electricity required to run and cool AI data centers. So Baron's suggesting that these electric utilities, despite the fact that they've moved up on anticipation of the fact that there's going to be this significant demand, still have more, let's stick with the the theme here, more juice left in the in the stocks. So we mentioned that there's been political pressure, electric costs are up about 30% since 2020. We've got that political backlash going on. And , in order to ease this opposition, and what's been happening is communities have been rising up and voicing opposition against data centers coming to their neighborhoods, tech companies are signing deals to cover the full cost of new infrastructure. And utilities are suggesting this could save average households of $100 or more annually on their bills, and the good news for the utilities is this is giving them some massive new potential customers. What's interesting is where is this growth happening? It's shifting away from traditional hubs like Northern Virginia to frontier markets in the Midwest and South, think Indiana, Louisiana, because there's areas where there is access to the grid, there's available land, there's friendly regulations in those in those areas. So which companies are we specifically talking about here in this Barron's article? Barons suggests taking a look at utilities such as Entergy, ETR, which is in Illinois, IdaCorp, which is in Idaho, IDA, and NYSource, NI, which is big operations in Indiana, which is key market for many of these big data centers. And these companies are projecting earnings growth as high as 8 to 9% annually. These are much higher growth rates than we've historically seen from the boring utility business. And they're able to achieve this, Barron says, by locking in decade-long contracts and building billions of dollars in new power assets. Now, critics are warning that many of these deals remain confidential and may leave consumers vulnerable if tech companies were to abandon the infrastructure after their contracts expire, before the assets as those new construction lifespans end. So that's the one area to be concerned or wary about. Barron's in another article talking about an airline stock, and if if you view the situation in the Middle East as something that you know that may be finite, then s the airline stock, which is American Airlines, which Barron said is ready to take off, I would suspect American Airlines is going to be down today with all other the airline stocks because of concerns about less travel. But if you think it's gonna be a temporary situation, which God willing it will, then perhaps this will create even a better time to purchase American Airlines stock. Baron's saying that American Airlines is attractively priced at 0.2 times sales. Their competitors trading at multiples of two to three times that. American Airlines is expected to earn between $1.70 and $2.70 a share in 2027. The stock is currently trading at $13.32, so forward multiple in the single digits. Robust premium and corporate travel demand coupled with debt reduction, they say supports American Airlines stock. Finally, the last thing I'll talk about here in these uncertain times has to do with bonds. Barron's saying that the bonds you know for the f for the long term aren't a sure bet with concerns about the U.S. deficit, and we talked about this morning concerns about inflation. So Barron's is saying that you may want to consider at least some alternatives, at least to a supplement your bond portfolio. So for decades, a 60-40 portfolio with 60% stocks, 40% bonds was the holy grail for retirees, but that safety net is perhaps fraying with the U.S. federal deficit projected to hit 7% of GDP by 2036. The government here is flooding the market with treasury bonds. Historically, higher supply leads to lower prices, lower prices lead to higher yields, meaning the bonds you buy today could be worth less tomorrow. So Baron says if you're looking for bond-like stability with without interest rate risk, you might want to think of a product known as a single premium immediate annuity. You can think of a single premium immediate annuity as similar to buying your own private pension. These are insured insurance products, and the way they work is you give the insurance company, and obviously you want to be mindful of the credit quality of that insurance company, you give them a lump sum, and they give you a payout based on your life expectancy. You can have different provisions to these terms. You could say pay it out over my entire life, pay it out over the entire life of myself and my spouse. You could say I want to get a guaranteed return even to my heirs for 10 years. You could say I want to make sure that I get back what I put in, so I want a guaranteed return of the premium. All of that will affect how much how much you get in return for your handing over a lump sum to an insurance company. To give you an example, for a 65-year-old woman, if she were to purchase a single premium immediate annuity and give an insurance company $100,000, she would receive about $630 a month for her lifetime. So different strategy, different way of thinking about guaranteeing income. It's again similar to creating a pension for yourself, similar to having worked at, let's say, at a government job, and at the end of that term you get a payout. This is creating your own payout. Of course, if you pass away, that payout may change different than if you had kept your money. The second thing you may want to think of is owning more equities. Of course, this has more risk. You gotta know yourself. Equities are gonna be more volatile than bonds they historically have. Doesn't mean they always will be, but historically that has been the case, and I was expected to remain so going forward. But , of course, we don't know the future. Owning a significant portion of assets or owning more stocks, , that is something that could be terrifying to many retirees. But over long periods of time, bonds are actually becoming more correlated with stocks, losing some of their diversification benefit. Now you do need a steel stomach to to own more equities. But what Baron says is that if if you are comfortable, take a look at dividend-paying stocks, increase your allocation. They suggest having significant allocation to international stocks to hedge against U.S. specific financial drama. In fact, they say to own two-thirds of your portfolio, this extra portfolio, let's call it, in international stocks, , to diversify your portfolio to a greater extent. So if you are worried about the rising deficit eating at your retirement, it might be time to look at taking a look at annuities for your must-have income, and a global stock mix for your nice to have growth and income. Before we wrap up here this morning, I will just take a quick look and see. Obviously, developments are happening very quickly this morning. Futures right now relatively similar to when we started talking this morning. The Dow is down about 500, SP's down 76, the Nasdaq's down 362, Dow and SP down about 1%, NASDAQ down about 1.5%, oil's up about 7.7%, and the 10-year treasury yield is hovering currently right around 4%, which is where it was when we started this morning. That's everything I've got.

Alan Eppers 32:31

Thank you for listening to Mr. Keith Lanton. This podcast is available on most platforms, including Apple Podcasts, Spotify. For more information, please visit our website at www.heroldlantern.com.

Sophie Cohen 32:49

Opinions expressed herein are subject to change and not necessarily the opinion of the firm. Pest performance is no guarantee of future results. The information presented herein is for informational purposes only and is not intended to provide personal investment advice. It is important that you consider your tolerance for risk and investment goals when making investment decisions. Investing in securities does involve risk and the potential of losing money. The material does not constitute research investment advice or trade recommendations.