Besides the Iran situation, what other factors are affecting the market?

Author: qinbafrank；Source: X, @qinbafrank

The market’s patience and confidence have been severely hit; the “spring ordeal” has become the “summer ordeal.” Besides the situation in Iran, what other factors are affecting the market?

Last Monday, we discussed that the market’s patience might still be able to hold on for the final week. But if, within that week, we still can’t see clear signals of a resolution, then the market’s patience and confidence may be dealt yet another severe blow.

In the last two trading days of last week, the market couldn’t hold up anymore. Many people believe that last week’s U.S. stocks broke down. But from my personal perspective—when I first brought up the “spring ordeal” trading scenario at the beginning of February—the U.S. stock market overall had already started to come under pressure. Since the beginning of February, the U.S. stock market overall has been suppressed by two most core logic lines:

1) In February, the market worried whether the capital expenditures by Big Tech that are expected to surge in 2026 can be booked as realized (i.e., “counts” as passed-through). The implied part is a change in the overall business model, and a downward shift in the valuation center of gravity. This has been discussed in earlier posts;

2) Starting in the late February, the Iran situation escalated further, and market worries about delays began to build. Up until February 28, when fighting truly started, it triggered concerns on multiple fronts—including inflation and recession—pulling U.S. stocks from a small pullback into a medium-term adjustment.

When I observe the market, I have a framework: within a given stage, rank the factors affecting the market by weight, and focus on the driver with the highest weight, because that’s the main driver logic. Market changes are largely driven by the evolution of that main driver logic, and the subsequent turning points and inflection points will definitely come from a change in the main driver logic.

At present, there’s no question that the continuing impact of the Iran situation is still dominant. The longer oil prices stay at high levels, and the more severely energy infrastructure is damaged, the greater the future pressure on inflation will be. In the short term, policy rates are being pressured downward; in the long term, demand is being pressured downward. Basically, this is the market’s most important pathway of influence from the Iran situation, and this has also been discussed many times before.

And now, the core focus of the Iran situation is this: whether the United States will send troops to control the key positions in the Strait of Hormuz and Iran’s key energy export bases; and whether the two sides, the U.S. and Iran, can ultimately reach an agreement.

As for the statements from the U.S. and Iran right now, in my view they both point to the possibility of continued ramping up and further escalation. Because Iran is still firmly in control of its asymmetric advantage in the Strait of Hormuz and has not let up at all. And Trump has signaled willingness to negotiate. But the problem is that if a “respectable” outcome is obtained, it would also be a disaster for the United States—politically, it’s not allowed. Currently, Iran’s parliament has already approved a bill to levy a transit fee on the Strait of Hormuz, which effectively forces the U.S. and Israel to upgrade their actions so they can try to knock out Iran’s ace in the hole.

Although today the media also reported that Trump said he intends to end the war even if the Strait of Hormuz is closed, I’m not sure whether that’s a smoke screen. If that’s the case, then even if we can’t say the U.S. completely withdraws from the Middle East, it would at least be retreating from the Persian Gulf: the core Bahrain headquarters of the Fifth Fleet Command, and the U.S. military bases in the UAE and Kuwait would likely be abandoned.

Of course, there are other factors affecting the market right now, but these factors are, to one degree or another, side effects of the Iran situation.

1) Everyone is worried about future inflation; the core is determined by how long high oil prices persist, which decides how long the inflation rebound will last;

2) The Federal Reserve may potentially raise rates in the future. Right now, the market’s focus is on high oil prices and the possible rise in an inflation rebound. In reality, people are also overlooking that the U.S. labor market in February has already broken down (there were no new nonfarm jobs added—if anything, it still decreased). From the bond market performance over the last two days, you can actually see some indication that bond investors have shifted from earlier concerns about inflation and rate hikes to concerns that demand will drop sharply, leading to a recession.

3) And actually, the AI fundamentals growth that most should be watched has already given way to geopolitical macro shocks. Of course, we’ll only be able to judge how much of the “AI Agent” hype that started at the beginning of 2026—when everyone is疯狂地 burning tokens—has been converted into cloud business revenue for Big Tech when the first-quarter earnings are released starting in late April. After all, most of the token compute power also comes from the cloud infrastructure of the major cloud providers themselves. If the results really are explosive, then naturally the market will confirm and validate that large-scale investment can indeed pay back. It’s just that the fundamentals players are still in the process of waiting, holding on until the geopolitical situation becomes clear.

4) The issue in private-credit funds: fundamentally, it’s an emotional shock driven by LPs wanting to redeem early in a context of high macro uncertainty. If you look carefully at data reports from BlackRock and Blackstone’s private-credit funds, it turns out that the credit assets now still look manageable and there hasn’t been a large-scale credit blow-up.

When I mentioned the “spring ordeal” trading scenario at the beginning of February, I believed that the U.S. stock broad market would experience a drawdown adjustment in a small-to-medium range. In early March, it was clearly discussed that this time the U.S. stock market should be in a medium-sized adjustment. At that time, the S&P was -6% and the Nasdaq was -8%. Today, the latest numbers are the S&P at -10%, and the Nasdaq at close to -13%.

Overall, it still comes down to the Iran situation. If Trump and the United States have to upgrade the situation and ultimately get negotiation leverage only through battlefield advantages, then throughout that process, the market will face further pressure.