Are the markets right or wrong about Iran?

Summary

Unhedged Podcast – Episode Summary

Episode Title: Are the markets right or wrong about Iran?
Hosts: Katie Martin & Robert Armstrong
Air Date: March 17, 2026

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Episode Overview

Katie Martin and Robert Armstrong dissect the strange dissonance between highly anxious investor sentiment and surprisingly resilient global financial markets amid ongoing geopolitical strife surrounding Iran, the war in the Middle East, and the blockage of the Strait of Hormuz. The conversation dives into how markets are pricing geopolitical risk, the behavior of different asset classes, and whether the current climate represents justified calm or dangerous complacency.

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Key Discussion Points & Insights

1. The Vibe Check: Markets vs. Investor Anxiety

Timestamps: 00:09–06:50

• Mood: Despite “super spooked” investors worried about Iran and private credit, markets (stocks, bonds, currencies) remain fairly stable—even “fine, not rosy, but not terrible.”
• Contrast: There’s a surreal disjunction—bad headlines, yet market calm.
  • Katie Martin: “How can everything be awful and fine at the same time?”
• VIX Movement:
  • The “fear index” (VIX) started the year at 15, peaked at 29 (Mar 6), now at 22.
  • Market volatility is up, but not at panic-inducing levels.
  • Robert Armstrong: “We started the year at 15 and it's been like chugging its way up... but it's not anywhere near the horrors of COVID or whatever.” (05:06)
• Fund Manager Surveys:
  • Bank of America reports a shift from “boom to stagflation,” with major worries about private credit and the geopolitics of Iran.
  • Notable jump in allocation to cash—“biggest jump since March 2020”—but still only at about 4-5%.
  • Despite jitters, managers are “still overweight equities” (i.e., still holding lots of stocks).
  • Katie Martin (on jargon): “If you are a normal person and…want to sound clever…say, ‘Oh, I'm actually overweight equities.’…It just means you own stocks.” (05:31)

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2. Markets Pricing In “Bad but Not Awful”

Timestamps: 06:14–08:10

• Flat/Stable Markets: S&P isn’t falling, NASDAQ is down a bit; market risk indicators are up but price action remains stable.
• Contextualizing the Risks:
  • “Not the ’70s, not the dot-com boom, not 2008, but a bit of each.” (Citing Anton Isa from Robeco.)
  • Katie Martin: “You can see horrible historical analogies…We do have a bit of each. And that's still not great.” (07:09)
  • Armstrong: Risks are meaningful but not system-enders—AI overinvestment, some bad private credit loans, uptick in oil prices—but no imminent meltdown.

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3. Oil and the Strait of Hormuz: Pricing Catastrophe

Timestamps: 08:10–12:41

• Oil Price Surges: Brent crude at $102—a ~40% hike since the start of the year.
• Comparison: Higher than recent levels, but not as high as 2022 (Ukraine invasion) or during the 2008 China boom.
• Insider vs. Outsider Perspectives:
  • Oil market insiders are worried—“some bad juju going on”—while broader market consensus appears indifferent.
  • Katie: “You numpties who don't understand the oil market don't know how bad this is.” (09:06)
• The Strait of Hormuz Blockade:
  • Armstrong: The real risk is non-linear. “Closure…gets worse geometrically rather than arithmetically as it goes on.” (09:54)
  • Inventories buffer things for now, but longer-term closure could be catastrophic.
  • Oil futures suggest markets expect things to normalize, with 2027 contracts near $77/barrel—“the most probable outcome is things are okay by then.” (11:06)

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4. Preparing for Extreme Scenarios

Timestamps: 11:12–12:41

• Katie Martin: Some investors are modeling for $200 oil, not because they expect it, but to be prepared: “It's not inconceivable that we could get in tomorrow when oil could be at 130, $140.” (11:33)
• Armstrong (Rule of Thumb): “In America, $10 a barrel on crude is a quarter on your gas price... If we go to 100 to 200, that's another $2.50 a gallon at the pump. There is going to be torches and pitchforks.” (11:53)
• Yet markets aren’t pricing in catastrophe: They expect eventual normalization, not doom.

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5. Market Behavior: Rebalancing, Not Panic

Timestamps: 12:41–14:09

• Recent moves are about trimming risk and rebalancing portfolios to neutral, not wholesale panic selling.
• Past “run to the hills” phases (like March 2020) aren’t happening now.
• Katie: “It's a rebalancing exercise, a...let's get back to neutral exercise, not sell everything and run to the hills.”

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6. Secular Changes: Oil’s Long-Term Pricing

Timestamps: 14:09–15:51

• Armstrong: Even if crisis “blows over,” we might not return to pre-crisis oil price averages.
  • More risk premium, deeper inventory, higher average prices ($75 instead of $65).
• Investment advice: “Maybe the day peace breaks out, you ought to buy oil companies because they're going to sell off when everybody breathes a sigh of relief. But maybe they've gotten a long term secular boost in valuation from this.” (15:33)
• Katie: Or maybe it boosts wind and solar instead.

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7. Geopolitics and U.S. Politics

Timestamps: 16:12–17:47

• Katie: “Your president…Donald Trump seems to be talking seriously about annexing Cuba. Is this a real thing?” (16:12)
• Armstrong: “I don't put any stock in what the President says whatsoever. You just watch his actions.”
• The U.S. appeals to European allies for help with Hormuz, exposing the limits of American “soft power.”
• Armstrong: “When things get messy, it is politically useful to have friends…It is also an economic stabilizer.” (17:32)

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Notable Quotes & Memorable Moments

• On the market’s psychology:
  Katie Martin: “How can everything be awful and fine at the same time?” (00:30)
• On the VIX:
  Robert Armstrong: “We started the year at 15 and it's been like chugging its way up... But the move is big. And so that is a good indicator of vibes changing.” (05:06)
• On analogies from the past:
  Anton Isa via Katie Martin: “This is not the 70s, in AI, this is not the dot com boom, in private credit, this is not 2008, but we do have a bit of each.”
• On oil market risks:
  Robert Armstrong: “Closure…gets worse geometrically rather than arithmetically as it goes on.” (09:54)
• On risk and complacency:
  Katie Martin: “You numpties who don't understand the oil market don't know how bad this is.” (09:06)
• On U.S. political spectacle:
  Katie Martin: “Your president…Donald Trump seems to be talking seriously about annexing Cuba. Is this a real thing?” (16:12) Robert Armstrong: “Bay of Pigs Part two, this time it's personal.” (16:56)
• On global alliances:
  Robert Armstrong: “When things get messy, it is politically useful to have friends…It is also an economic stabilizer.” (17:32)

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Timestamps for Important Segments

| Segment | Timestamp | |:------------------------------------- |:----------:| | Market mood vs. market behavior | 00:09–06:50| | VIX and investor sentiment | 02:44–06:14| | Are current risks like history’s worst?| 06:14–08:10| | Oil, the Strait of Hormuz, scenario risk | 08:10–12:41 | | Rebalancing vs. panic in stocks | 12:41–14:09| | Oil’s long-term price implications | 14:09–15:51| | U.S. politics and global alliances | 16:12–17:47|

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Tone & Style

The episode blends dry wit and skepticism (“Charts on the Radio”), jargon-busting moments (“overweight equities” explained), and a refrain of “it’s all about vibes.” The hosts balance technical explanations with colorful, intelligible metaphors (“bad juju in the oil market,” “torches and pitchforks at $200 oil”).

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Closing Bit: The “Long/Short” Segment

Timestamps: 18:13–20:46

• Rob: Shorting quarterly reporting (“The problem…is not volume but quality.”)
• Katie: Longing Marc Andreessen—for comedic value only. Laughs at Andreessen’s claim that “introspection” was invented in the 1910s:
  • Katie: “He said...400 years ago it would never have occurred to anybody to be introspective…It's all a new construct from Europe.”
  • Armstrong: “Did anyone tell Augustine about this?...Introspection was invented in 1910 by Sigmund Freud. That's literally, I'm not joking, that's what he said.”

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Bottom Line

Despite alarming headlines and genuine risks (Iran conflict, oil shock, private credit), markets’ lack of panic reflects a consensus that this crisis will “blow over”—but the episode warns listeners to prepare for the possibility that this complacency could prove costly if escalation persists. The show closes on the importance of global alliances and a tongue-in-cheek appeal to “be nice.”

Transcript

[A]

Foreign,

[B]

The mood among investors is bad. They are super spooked by Iran and also by private credit. But financial markets, stocks, bonds, currencies, all that jazz, they're kind of fine, like not rosy, but also very much not terrible. It's quite a weird contrast, and it suggests that despite every headline on Iran, every new development, investors are still fixed on the idea that somehow the war in the Middle east and the blockage of the Strait of Hormuz will just somehow magically blow over. Today on the show, how can everything be awful and fine at the same time? Is the market right or wrong? This is Unhedged, the Markets and Finance podcast once again for normal people from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at FT Towers in bright and sunny London. Joined down the line from New York City, my first Sea Lord, Robert Armstrong, my partner in crime on the Unhedged newsletter, which you should all sign up to at once. Rob, it's still chilly out there. No, that must be getting quite boring by now.

[A]

Oh, it's horrible. As I've said on a previous show, there's nothing as horrible as the month of March. The freezing outside today.

[B]

Now, we have received multiple emails from listeners since the last show saying, me, me, I listen to the show and I'm normal.

[A]

Yeah, last time I questioned for listeners who didn't listen last time. Last time I questioned whether any normal people actually listen to this show, but which I generally meant people who don't have all the professional deformities that come along with working in finance. And a lot of people claim to be normal who listen to the show, but claiming you're normal is a little bit like saying, I don't know you're. That you're not a spy or that. Yeah, you know, it's like it. It only makes me more suspicious when you have to say it out loud.

[B]

Yeah, you are. Like, how I have a degree in Russian, but I swear I'm not a spy. Yeah, my kids think I am, but I'm genuinely not. So, look, let's talk about the vibe, man. It's all about vibes. So start of the year, I'm going to say it was pretty euphoric, right? That was a word that Deutsche bank was using in a note the other day of U.S. interest rates that are heading down. You have U.S. fiscal policy, so taxes also coming down. You have Germany splashing the cash for once. You have loads of companies spending tons of money on AI. Everything is good. And now it's like, stop that I

[A]

would frame this point, Katie, in terms, just one way to do it anyway is to frame it in terms of the VIX index, which is the index of expected volatility over the next month in the S&P 500.

[B]

Yeah.

[A]

And the way that people call it

[B]

the, the fear index. And then finance pointy heads get in touch and say, oh, actually it's just a measure of expected volatility. Doesn't matter for our purposes.

[A]

And basically what it does is it reflects how expensive it is to buy options to buy or sell the S&P 500 over the next month. And if you think the volatility is going to be higher, you pay more for the options. That increases the chance that the options will turn out to be profitable. So anyway, we started the year at 15 and it's been like chugging its way up and it peaked March 6th at 29. Now it's back to 22. But it's like been following this volatile path up.

[B]

Yeah.

[A]

So there's also, of course, an index called the V vix, which is an index of how volatile the VIX is.

[B]

Yeah.

[A]

And that one's up too.

[B]

The, the favorite.

[A]

Whether there is also a fear of Fear of Fear index is, is an open question. I, I, I'm sure someone, somewhere, somewhere somebody's trading it. Yeah, somebody's trading it.

[B]

But if you go out and talk to investors one to one, which you and I do all the time, or if you do surveys of what hundreds of fund managers think all at the same time, which usefully bank of America does every month, you do come across this idea that, like, people are quite jumpy. Right. So the latest survey from bank of America was out just the other day. It said the mood has gone from boom to stagflation. There are major worries about private credit, major worries about geopolitics. Obviously Iran, yada, yada. There is a dash to cash. So there's the biggest jump among fund managers into cash, which is where you go if you really are worried about what's happening next and you don't want to be in risky stocks or anything else. Biggest jump into cash since March 2020. I remember March 2020, Rob. Do you? It was not great.

[A]

It was not great. However, I am looking at the cash allocation chart and welcome to the part of the show we call Charts on the Radio.

[B]

Charts on the Radio, people.

[A]

It is a very big jump in the March bank of America fund manager survey, but it's not at a super high level yet. It's not anywhere, you know, it's not at the level of Liberation Day yet, let alone the horrors of COVID or whatever. So there's more cash, but we're looking at average cash allocation of 4 something percent. And it's not huge yet, but the move is big. And so that is a good indicator of vibes changing.

[B]

Yeah, vibe shift, dude. So also the survey from bank of America said that fund managers are still overweight equities. Now that is jargon. Four, we still own lots of stocks. So if you are a normal person and you have ISAs or you have other holdings of stocks in the stock market, a way to sound clever about that is to put your glasses on the edge of your nose and say, oh, I'm actually overweight equities. It just means that you own stocks. But, but so, so it is weird. People aren't selling, you know, their core holdings, but they are telling people either sort of one to one with people like me and you or in surveys that, yeah, they don't like what they see. It is quite odd, isn't it?

[A]

I mean the S and P stopped going up basically in October. Yeah, but it's not really going down. Yeah, it's just kind of flat. You know, the NASDAQ is down a little bit, but really we've seen the kind of vibe indicators shift a little bit in the way you've described in exactly the way one might expect they would shift in wartime. But the risk asset markets, like the spot or cash prices for risk assets, pretty solid, you know, and that, that's the kind of weird contradiction we're sort of sorting our way through here.

[B]

I think it's because there's a lot of things that are like bad but not awful. So. I know, Rob, you religiously read everything that I write. So you will have seen in one of my columns the other day, I quoted a chap called Anton Isa from Rubico, which is a big Dutch asset manager. And he said in geopolitics, this is not the 70s, in AI, this is not the dot com boom in private credit, this is not 2008, but we do have a bit of each. And that's still not great. And I think that's actually quite a good way of putting it. Right. You can see horrible historical analogies.

[A]

Yeah, I really agree with what he said there, by the way. You know what I mean? I think that that praises it perfectly. Do I think the big hyperscalers, as they call them now, are spending so much on AI data centers that they cannot possibly make a good return on equity and Yes, I certainly do believe that. Do I think that will cause them to go out of business? No, I certainly do not think that.

[B]

Yeah.

[A]

Do I think there's some crappy private credit loans out there that are going to have to get marked down? Yes, I do. Do I think there are enough private credit loans out there that if they all went a little bit bad all at once, we'd have a financial crisis? No, I do not.

[B]

No. No. And so the oil price, it's worth putting this into context. So last time I looked at my screen, we were about $102 a barrel on Brent, which is the main European benchmark. That's bad. Right. So that's up, I think, something like 40% over the course of this year. That's a steep increase in oil costs which affect all of us, whether you like it or not. But the oil price was higher, much higher in 2022 when Russia properly invaded Ukraine. Russia, obviously a big supplier of oil and gas in it was much higher still in the run up to the crisis in 2008 because China had got its boots on. Huge economic boom in China that just led to lots and lots of demand for all sorts of commodities, including oil. But that wasn't the reason why the system fell over in 2008. So the system is perfectly capable of handling large increases in the oil price. It's just, I guess that one of the things that I find quite weird is still, and I think we've mentioned this on the show before, like, when you talk to people in the oil market, they're like, ooh, there's some bad juju going on in the oil market here. I do not like this one little bit. And you numpties who don't understand the oil market don't know how bad this is. And when you talk to everyone else, they're like, la, la, la. I'm sure it'll be fine.

[A]

Well, what they're saying, I mean, I spent the day yesterday getting some oil people on the phone, and clearly the belief is that the closure of the Strait of Hormuz is a thing that gets worse geometrically rather than arithmetically as it goes on in time.

[B]

I see.

[A]

Right. Like right now, we're in this moment in time where there's a lot of oil inventory in the world still. But if you take out about a fifth of the world's daily supply, those inventories dwindle pretty quickly and. And some weeks or a couple months in the future, suddenly the global well is dry and you have a real problem. But and here is the big. But that doesn't seem to be the outcome that people expect. And let me give you an illustration of this. The price of oil in a year's time. Like if you and I want to make a contract for buying oil to be delivered In May of 2027, it's $77.68, which is only about $10 higher than it was when the war started. So that price, that future price, isn't pricing in things being awful. It's like giving you a little bit of extra price in there just in case things are awful in a year's time. But basically $77 in a year says to you the most probable outcome is things are okay by then.

[B]

Yes, Right.

[A]

But it makes sense. I don't know if they will, but that's what that price is telling you.

[B]

Yeah, but there is also there was another investor I was speaking to the other day who was like, look, chances are we do bob along somewhere around this hundred ish dollars a barrel. But we've got like economists in the room who are modeling what would happen if we went to $200 a barrel in a straight line. What would that look like economically? What would that look like for markets? So, you know, they're not saying this is a thing I think is definitely going to happen. They are saying it is worth our while to just think about what would happen in this scenario. And it's not normally, that's normally a waste of time because it's just stupid. But at the moment it's not inconceivable that we could get in tomorrow when oil could be at 130, $140.

[A]

Some person who's smarter is going to write in and tell me I'm wrong about this. But my understanding is that the rule of thumb in America is $10 a barrel on crude is a quarter on your gas price. If we go to 100 to 200, that's another $2.50 a gallon at the pump. There is going to be torches and pitchforks. I tell you what, we have $200 oil. So yeah, so like that is a terrible scenario. But again, the market doesn't anticipate it. And look, I think you can sketch out a scenario without dabbling in geopolitics in which both sides declare victory and go home. That happens, the strait opens up slowly, oil prices start working their way down, and we're back to worrying about AI again by the summertime.

[B]

Isn't it amazing how quickly we've all stopped worrying about AI Right, so All of last year we worried obsessively about AI, you know, is it a bubble, yada yada. Then at the start of this year, suddenly we started worrying about, oh, maybe it's not a bubble, maybe it's going to eat all of these software companies. But I was reading a little note from Deutsche bank earlier. It was pointing out that really what we've seen in markets through the course of this crisis in Iran so far, this conflict in Iran is not a kind of sell everything, run to the hills, I'm very worried sort of dynamic in markets. It's, I'm going to trim the stuff that has been, you know, doing well and I'm going to kind of get a bit more kind of back to neutral. So for example, some of the like most poorly performing stocks at the start of this year were software stocks because we were all going through this thing saying AI is going to eat all of these software companies. They've actually recovered pretty nicely because people were like, oh, turns out I don't own very many software stocks anymore and maybe I should kind of get a little bit more back into balance. So it's a rebalancing exercise, a kind of let's get back to neutral exercise, not sell everything and run to the hills. Which it does feel a little bit, I don't know, I feel like that's a little bit too sanguine. I think because you're like a reflexively more optimistic person. You think that's probably about right.

[A]

I think that's right. Look, risk assets are expensive across the board. You know, I'm not leaping and jumping up and down and saying buy them all, double down, leverage up and everything else. Yeah, but what I am saying is, and what I think the oil price is telling you and a lot of other prices are telling you is this is a nasty crisis where the central forecast is that it blows over in the near term. If it does not, we are going to see some big price changes. But right now, what is priced in seems about right to me. And that doesn't mean this is not significant. For example, one thing I'm interested in is when we get to the other side of this war, will it have repriced oil in a permanent way? You know what I mean? Like we've suddenly realized, boy, this is a fragile system and we need to buy more insurance and we need to have more redundancies. We need to hold deeper inventories all over the world to make sure it's secure. All of this means kind of increased demand and increased Risk premium across the board for oil. Not hugely, but if we were like headed for a 65 a barrel world, kind of middle price or, you know, mean price over time, maybe we're in a $75 world now.

[B]

Yeah.

[A]

Which means, you know, and this was the kind of the punchline of the newsletter yesterday, which means maybe the day peace breaks out, you ought to buy oil companies because they're going to sell off when everybody breathes a sigh of relief. But maybe they've gotten a long term secular boost in valuation from this.

[B]

Maybe. Or maybe the world decides that we should stop being so reliant on this incredibly volatile part of the world and just do wind and solar properly.

[A]

That could happen too. I mean, the same argument, by the way, would apply to those other sources of energy too. Right. And they would probably sell off on peace too. So that would be a good time to buy your wind and solar names.

[B]

I would think so. Just thinking very briefly about things that can go wrong in addition to everything that's already gone wrong. I don't think this is necessarily a market moving event, but it's still a what the hell event. Your president, Robert Armstrong, your president Donald Trump seems to be talking seriously about annexing Cuba. Is this a real thing?

[A]

Well, because our history with Cuba is just one good decision by the American government after the next. I can only assume that proud tradition is going to continue.

[B]

So, yeah, America is tired of all the winning in Cuba over the past.

[A]

Bay of Pigs Part two, this time it's personal.

[B]

Yeah.

[A]

Is going to, you know, the movie, you know, I don't know. I don't put any stock in what the President says whatsoever. You just watch his actions. I think he's got his hands full right now. And you know, all the rhetoric, you just put it aside.

[B]

He has got his hands full because he turned to Europe, who he's been busy insulting for the past few years and said, oh, guys, can I have some help opening up the Straight of Hormuz? And everyone said, let me think about.

[A]

No, it was a good demonstration of what soft power is.

[B]

Yeah, right.

[A]

Which is when things get messy, it is politically useful to have friends around the world. And it is also an economic stabilizer.

[B]

Yep.

[A]

So I think maybe. Have we all learned a lesson here, class?

[B]

Yes, listeners, if you learn nothing else from this, it's be nice. It's nice to be nice. So be nice. And in the meantime, we're going to be back in just one second with long shorts. Okay. It is time for long short. That part of the show where we go long a thing we love or short a thing we hate. Rob, what you saying?

[A]

Katie, I'm going to shock you. I'm short quarterly reporting. There is a story going around the newspapers today that the SEC is considering a proposal to no longer require American companies to report four times a year. It would be twice a year and I think that would be fine. I think the problem with information in the stock market is not volume but quality. And so there is a lot of issues about how companies report and, and like what information they should disclose. Each time they disclose, you know, they release their earnings and so forth. And you know, sometimes I think there's been a trend to releasing too much information so the important information gets lost in the thousand page annual report or whatever. But I think twice a year is fine and not much information will be lost to the market.

[B]

I think I would agree with you if it wasn't for the fact that the general tone in US financial regulation at the moment is, oh, it's fine, just go do some fraud.

[A]

We can just do things.

[B]

Speaking of just doing things, I don't know if you're familiar with this story, Rob, but I am. Long Marc Andreessen, he's like big like US tech venture capital type person.

[A]

Yes. You're longing him that's.

[B]

Well, he has given me a right laugh this week. I have been laughing a lot at it. He did a podcast in which he said he does no introspection of any kind. He said you just move forward and go. And I guess that's kind of, you know, this kind of grind core kind of hustle, hustle mindset. But you will enjoy this, Rob, because I believe you have a background in philosophy. He said, And I quote, 400 years ago it would never have occurred to anybody to be introspective. He said all the things around introspection were manufactured in the 1910s and 1920s in Europe. It's all a new construct from Europe. And that Europe invented the.

[A]

It's like what was Immanuel Kant doing back there? You know, like, did anyone tell Augustine about this?

[B]

I don't think anyone has informed, for example, Aristotle, that nobody, sorry.

[A]

Introspection was invented in 1910 by Sigmund Freud.

[B]

That's literally, I'm not joking, that's what he said.

[A]

Mencius, Confucius, the Buddha.

[B]

Yeah, Catholicism.

[A]

They were just grinding and making startups.

[B]

No one had ever thought about the self before and therefore we should not think about the self. So I'm glad that made you laugh because that made me laugh. As well. That's a good one. So anyway, very funny listeners. Remember to be nice. It's nice to be nice. And we will be back in your ears on Thursday. Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forehead. Cheryl Brumley is the FT's global head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30 day free trial is available to everyone else. Just go to ft.com unhedged offer I'm Katie Martin. Thanks for listening.