Markets Brief: Will the Iran War Trip Up the AI Infrastructure Boom?

There isn’t much to worry about in the US stock market. As a group, US stocks are down just 4% since the start of the Iran war, and they’re outperforming markets around the world that led returns in 2025. Most observers previously thought the war would be winding down by now, but the longer it goes on, the greater the likely impact across the global economy and financial markets.

The Iran War’s Risk to Semiconductor Stocks

One area to watch is the supply chain for semiconductor stocks. Last week brought the news that an Iranian strike led to Qatar taking 17% of the world’s liquefied natural gas production offline. This threatens the semiconductor chip industry, which is a key part of the artificial intelligence infrastructure buildout. As Phelix Lee, who covers key Asian semi stocks, wrote on March 10, “Rising energy prices, if prolonged, could be a near-term risk for chip manufacturers. Higher energy costs for AI data centers could slow AI infrastructure buildouts, while fabs in Taiwan and South Korea would face growing cost pressures from higher LNG prices.”

The impact goes beyond the energy input. Other parts of the supply chain are at risk, most notably helium. “Helium is a byproduct of LNG processing, so large-scale damage to LNG infrastructure could lead to drawn-out shortages even if the war were to end, as additional time is needed to bring operations back online,” Lee wrote. A prolonged helium shortage could ultimately lead to high levels of defects in chip wafers, driving down profitability.

Brian Colello, a senior equity analyst who covers US-based semiconductor stocks, adds that Nvidia CEO Jensen Huang downplayed the near-term risk from a helium shortage. “[Huang] thinks Taiwan Semiconductor has something like four to six months of inventory,” he says.

From our London bureau, senior reporter Karen Gilchrist dives deeper into the risks for semiconductor stocks.

How Much Will the Gas Price Surge Lift Inflation?

Amid the war, with gas prices in the United States rising, investors should be ready to see that jump-start passing straight through to inflation readings, according to PIMCO economist Tiffany Wilding. Nationwide, consumers are paying about 30% more per gallon of gas than before the war started, by Wilding’s measure. Gas prices have about a 3% weighting in the Consumer Price Index. That equates to a 0.9-percentage-point month-to-month jump in inflation. (In February, the CPI rose 0.3%.)

“Because we’ve seen that escalation throughout March, you’re going to see it spread lightly across March and April,” Wilding says. “The bottom line is that right now, if [elevated oil] prices are maintained, there will be an increase the headline reading of almost a percentage point as a result of the direct effect of gas prices. That’s pretty dramatic.”

Of course, Federal Reserve officials and many investors focus on inflation excluding food and energy costs, and instead look at core inflation, since these goods can see wide swings in prices. But other aspects of core inflation data will also see an indirect impact, such as airfares. Airfares have a relatively small weighting in the CPI, and there isn’t a direct pass-through from jet fuel prices, but they will add to the upward pressure on inflation.

Return Dispersion and the Stock Market’s “Weight Problem”

The war began as the stock market was solidly in a long-awaited rotation away from the mega-cap technology stocks that had largely led the bull market for three years. Big names, most notably Microsoft MSFT, saw their stocks stumble starting in October. Adam Turnquist, chief technical strategist at LPL Financial, highlights that this rotation had led to a broadening of returns across the market from the highly concentrated landscape that had been dominating portfolios.

“Before we moved into the Iran war this year, we had this big rotation out of technology stocks. What was important was that capital never flowed out of the market; it just rotated into other areas like materials and even some [consumer] staples,” Turnquist says. The result was a greater dispersion of positive returns away from a handful of big stocks.

The irony is that while many market commentators viewed the concentration in Big Tech as a risk, this rotation was proving a drag on the market’s broad benchmarks. “We framed it up as ‘The S&P 500 has a weight problem,’” Turnquist says. With the top five largest stocks in the S&P 500 constituting some 25% of the index, “it takes six sectors to offset those five names, and that’s a problem for the market going up.”

With the war, some of that dispersion has diminished and investors have gravitated back to some tech stocks, seeking safety from the economic uncertainty, Turnquist notes. But he says that whenever the conflict does end, barring a significant shock, the trend will resume. “[Dispersion] is going to be the theme of the year,” he says.

Even beyond the war, Turnquist expects stocks to remain volatile against a backdrop of curveballs from monetary and government policy, as well as the looming midterm congressional elections. “This should create more choppiness and dispersion,” he says.