Last night, Israel carried out a series of strikes targeting Iran’s nuclear program and assassinating top Iranian military commanders. Iran retaliated with missile strikes of its own as the long-running feud between the two countries erupted into open conflict.

Investors were spooked by the escalation in hostilities, and stocks tanked at the open. Oil prices jumped to over $74 a barrel at one point before pulling back, while gold spiked as traders flocked to safety. The dollar also climbed, illustrating that the battered currency is still a safe haven for global investors.

As for stocks themselves, a number of sectors ebbed and flowed depending on how the conflict is expected to affect them. Today’s biggest losers were any companies connected to the travel industries, including hotels like Hilton Worldwide and Marriott, as rising geopolitical conflict is likely to stifle demand.

Surging gas prices hurt airlines like United Airlines, Delta, and Boeing, even as countries in the Middle East closed their airspaces after the attack, adding another headwind. Investors worried that rising fuel prices will also eat into the margins of cruise lines, pushing shares of Carnival and Royal Caribbean lower.

But higher oil prices helped energy stocks such as Occidental Petroleum, Exxon, and Halliburton, and more conflict means more business for defense companies such as Lockheed Martin, Northrop Grumman, and RTX. And shipping companies like ZIM Integrated Shipping Services rose on the theory that freight rates will rise if shipping operators are forced to take longer detours to avoid the Middle East.

History doesn’t repeat itself, but it often rhymes

When geopolitical tensions soared after Russia invaded Ukraine in 2022, oil prices spiked, global growth slowed, and inflation accelerated, prompting central banks across the world to restrict monetary policy.

But that was then—what does today’s news mean for markets? EY-Parthenon Chief Economist Gregory Daco argued that a moderate escalation of tensions in the Middle East would likely result in a 0.5% decline in global GDP, while a full-on war could cause a global recession.

However, the International Monetary Fund released a report in April on how geopolitical risk hurts asset prices. Researchers found that stocks tend to drop just over 1% on average in the month after an international military conflict. That being said, the market often balances out after a few weeks after investors’ shock wears off.

The bottom line: There’s no need to make any rash investment decisions based on today’s news.

“We view the escalation between Israel and Iran as adding additional fuel to our inflation narrative, with energy prices set to move higher—feeding through to various components of the CPI basket,” explained chief investment strategist at Innovator Capital Management Tim Urbanowicz. “For equities, we see any near-term impact on US markets as likely to be short-lived, assuming the conflict remains contained.”—LB

🟢 What’s up

• Gold stocks gained as investors pushed the price of the safe-haven commodity higher. Newmont climbed 3.54%, Barrick Mining added 2.81%, and SSR Mining rose 2.25%.
• Tesla gained 1.94% on reports that the Trump Administration will lower the bar for regulations on self-driving cars.
• Circle surged 25.54% a day after Shopify announced it will accept USDC stablecoin payments on its e-commerce platform.
• RH popped 6.90% after the home furnishings retailer reported far better earnings than Wall Street predicted, even though revenue fell last quarter.
• JBS rose 4.69% the day the world’s largest meatpacker made its NYSE debut.

What’s down

• DraftKings fell 3.90% thanks to the gambling app’s decision to add a $0.50 surcharge to every bet made on its platform in Illinois to offset a new state tax.
• Adobe tumbled 5.32% despite the software company’s solid earnings report and higher fiscal forecast.
• Archer Aviation plunged 14.89% after announcing it will sell $850 million worth of new shares to raise money.
• Boeing lost another 1.62% as the fallout from a 787 Dreamliner crash in India continues.
• US Steel sank 3.03% on reports that Nippon Steel is balking at taking over the company if it can’t retain operational control of the domestic steelmaker.

Good news comes in threes. On Wednesday, a tame CPI report showed fears of rising inflation due to tariffs haven’t come to fruition just yet. On Thursday, PPI revealed that higher prices aren’t hitting domestic manufacturers too hard yet, either.

The week ended on an economic high note today: Preliminary results from the University of Michigan’s consumer sentiment survey showed that Americans are a lot more optimistic these days. The index rose 8.3 points in the early innings of June to 60.5—well above estimates, and 15.9% higher than where it stood last month, marking the biggest monthly gain since January 2024.

Consumers seem pretty pleased with the idea that President Trump’s tariffs may not be as bad as originally feared. They now expect inflation to rise by 5.1% this year, down from forecasts of 6.6% in May, and the biggest one-month drop since October 2001.

Good news is good and all, but be warned: Most analysts believe that companies stocked up on goods before tariffs hit to keep prices flat. As those goods get sold and inventory dwindles in the months ahead, they worry that companies will be forced to push prices higher—whether consumers can handle it or not.

Move over, Visa and Mastercard: In the not-too-distant future, Americans may leave their plastic behind and pay for their shopping sprees with stablecoins instead.

According to the Wall Street Journal, companies like Walmart and Amazon are exploring the possibility of issuing their own stablecoins. For the uninitiated, stablecoins are a type of cryptocurrency whose value is tied to legal tender like the US dollar. This helps keep a stablecoin’s value relatively steady, providing a reliable payment method that skirts the wild volatility of many popular cryptocurrencies out there today (We’re looking at you, fartcoin).

Retailers have good reason to create their own stablecoins, or even potentially band together to create a consortium of merchants under one stablecoin issuer: It would allow them to do an end-run around traditional payment methods issued by banks and credit cards, which siphon off an estimated 1.10%–3.15% in fees for every transaction. For retail giants like Walmart and Amazon, that amounts to billions of dollars.

A bill making its way through Congress could also help spur the acceptance of stablecoins across the economy. The GENIUS Act aims to regulate the $238 billion stablecoin industry and protect consumers, creating a clear path for businesses to issue their own stablecoins. If this bill comes to pass, “We’ll likely see a flood of them rush into the market at the start,” said Nic Puckrin, a crypto analyst and founder of The Coin Bureau.

Stablecoins steal the show

Stablecoins have been met with rave reviews lately. Circle Internet Group, which issues USDC, the second largest stablecoin on the market, went public on June 5 and soared 168% on its first day of trading, and remains up over 270% to date.

But while the newly minted stock is a clear winner of wider stablecoin adoption, investors are worried that traditional financial companies are about to be hit with a wave of disruption if stablecoins go mainstream. That’s why shares of many major payment companies took a nosedive Friday: Visa fell 4.99%, Mastercard sank 4.62%, American Express lost 3.42%, and PayPal dropped 5.32%.

Still, analysts are skeptical whether this slump will stick, since retailers have tried and failed to forge their own payment methods in the past. One of the most infamous was Meta Platform’s attempt to create its own stablecoin back in 2019 called Libra.

Considered the first first major digital currency challenge to banks, Libra drew scathing criticism from authorities until Meta backed down and sold it in 2022. Still, Libra haunts lawmakers’ discussions to this day: Lobbying groups warn that the GENIUS Act could place “an excessive concentration of economic power” in an already powerful big tech company. Might concerns over Amazon’s and Walmart’s dominance cause this bill to hit the skids? Only time will tell.

Bottom line: Given many average Americans may not even know what a stablecoin is, they might be skittish about adding it to their cart without some serious education and incentives. Today’s news indicates interest, but there’s still a long way to go before Walmart gets into the crypto game.—JD

• Tesla’s vehicle registrations in the US sank 16% last month.
• Amazon has completely reorganized its healthcare business.
• Corporate insiders are dumping their shares at the fastest pace since last November.
• Two of the biggest crypto platforms in the world are about to break into the European market.
• Bye-bye Buffett Bump: Berkshire Hathaway briefly hit correction territory today.
• World leaders convene in Canada this weekend for the G-7 Summit, and all eyes are on President Trump.

The earnings calendar is looking mighty bare these days. Homebuilder Lennar reports on Monday, then there’s a big ol’ bunch of nothing, then Friday ends the week on a high note with CarMax, Accenture, Kroger, and Darden Restaurants.

Economic data doesn’t have its usual razzle dazzle next week, either. The only highlights to watch are US retail sales, homebuilder confidence, and the import price index on Tuesday, and housing starts on Wednesday.

But there is one thing that every investor should be watching next week: The Federal Open Market Committee, aka the governing body of the Federal Reserve, meets on Tuesday. The two-day discussion wraps on Wednesday, which is when Fed Chair Jerome Powell will announce the central bank’s latest interest rate decision. He’s widely expected to retain his patented wait-and-see approach to how the economy fares with tariffs, but it will be worthwhile to hear Powell’s comments after the meeting’s conclusion to learn which way the winds are blowing.

Don’t forget that US markets are closed on Thursday for Juneteenth, which means no Brew Markets until Friday (can you believe Neal wouldn’t give us Friday off??).

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