Why War Isn’t Spooking Wall Street—Yet

Summary

WSJ What’s News – Episode Summary

Episode: Why War Isn’t Spooking Wall Street—Yet
Date: March 18, 2026
Host: Luke Vargas (The Wall Street Journal)

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Episode Overview

This episode examines how global markets—and particularly U.S. equity markets—have reacted to escalating conflict in the Middle East, including attacks between Iran and Israel, soaring energy prices, and inflation risks. The main discussion focuses on why Wall Street remains relatively calm despite mounting stagflationary pressures, and what could change that outlook. Additional segments touch on the U.S. Postal Service’s challenges with losing Amazon as a major customer and political developments in Illinois.

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Key Discussion Points and Insights

1. Escalating Middle East Conflict and Market Response

• Gulf Leaders’ Position: Gulf officials advocate for a policy of crippling Iran before ending regional hostilities, representing a shift from past strategies of engagement with Tehran.
• Recent Incidents:
  • Iran launched missile attacks on central Israel, causing casualties and further tensions.
  • U.S. embassy in Baghdad also targeted by missile and drone attacks.
• Energy Impacts: The conflict has resulted in the effective closure of the Strait of Hormuz, driving up energy prices and stoking global inflation concerns.

Notable Quotes

• "The only acceptable outcome of the war would be an Iran so enfeebled that it could never imperil its neighbors again." (Gulf Official, paraphrased by Luke Vargas, 00:57)
• "As of now, we're actually having a stagflationary risk that is growing by the day without a quick de-escalation." (Emmanuel Koh, 00:44 and 05:46)

2. Why Wall Street Is Unfazed (So Far)

Guest Interview: Emmanuel Koh, Head of European Equity Strategy at Barclays
Host: Luke Vargas

Key Points

• Current Market Attitude:

  • Investors believe President Trump will prioritize U.S. economic stability and swiftly address shocks to avoid prolonged stagflation.
  • There is "trauma" from investors who sold equities after “Liberation Day” the previous year—an action many now view as premature.
  • "The market is pretty comfortable with the view that President Trump cannot afford to have a long-lasting shock and stagflationary heat to the U.S. economy." (Emmanuel Koh, 02:58)

• Oil and Equities:

  • Historically, a 30% spike in oil prices triggers a 10-15% drop in equities; currently, global equities have dipped only 4%.
  • Market seems "too complacent" about possible escalation, as the usual risk-off pattern hasn’t materialized.
  • "It's not the typical risk off we had in previous oil supply shocks." (Emmanuel Koh, 04:20)

Safe Havens and Differentiation

• U.S. markets and the dollar are acting as safe havens, even as other regions (Asia, Europe) see larger equity declines.
• European bond markets are pricing in rate hikes from the ECB, whereas the U.S. market still expects a potential rate cut from the Fed.
• "The most hit markets are those which are the most energy sensitive." (Emmanuel Koh, 04:45)

Consumer Outlook

• The U.S. consumer outlook is worsening "because we have lower growth and higher inflation as a consequence of this oil shock." (Emmanuel Koh, 05:46)
• Sentiment surveys reflect increased consumer caution as gasoline prices soar.

Central Bank Dilemma

• Fed, ECB, Bank of England, and Bank of Japan all face critical policy moments as they evaluate inflation from the oil shock.
• Central banks may inadvertently stoke stagflation fears if they pivot too aggressively toward combating inflation and away from fostering growth.
• "We have a busy week with the Fed. We have the ECB, the Bank of England as well, meeting on Thursday and the Bank of Japan as well... whether they start to embrace what the market seems to be pricing, which is basically a higher rate in the case of Europe or less rate cuts in the case of the US." (Emmanuel Koh, 06:31)

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[02:58 - 07:09] Deep Dive: Wall Street's Cautious Optimism

• Analysis of historical market reactions to oil shocks.
• Discussion of the unique features protecting U.S. markets, including energy exports and the dollar's safe haven status.
• Insights into investor psychology post-previous conflicts.

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3. Fed Decision and Inflation Outlook

Guest: Nick Timoros, WSJ Chief Economics Correspondent

• Fed faces déjà vu: succession of crises making monetary policy more complicated (pandemic, Ukraine, tariffs, now Mideast conflict).
• "What the war does is that it freezes up your ability to make big judgments. So if you thought the bigger problem before all of this was still in the labor market, you may look at the possible destruction of demand that comes from higher oil prices and say, well, now the labor market is going to be in an even more fragile position." (Nick Timoros, 07:26)
• Policymakers now debate whether future moves should still be toward rate cuts or shift to a neutral/hawkish stance.
• "Can they credibly suggest that the next move in interest rates is still more likely to be a move down than a move up?" (Nick Timoros, 08:28)

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[07:13 - 09:00] Key Segment: The Fed’s Fork in the Road

• Focus on today’s rate announcement (2pm ET) and its implications.
• Discussion of how recent shocks have shifted the narrative for central bankers.

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4. Amazon–USPS Developments

• Amazon plans to slash the number of packages sent via USPS by at least two-thirds due to uncertainties around contract renewal.
• USPS faces dire finances: “At our current rate, we’ll be out of cash in less than 12 months... the Postal Service would be unable to deliver the mail.” (David Steiner, Postmaster General, 09:04)
• USPS seeks Congressional help to raise the debt limit and relax price controls.

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[11:04 - 12:00] News Segment: Amazon/USPS and Political Stories

• Explains USPS's reliance on large contracts, risks posed by Amazon's withdrawal, and Congressional testimony.

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5. Illinois Primary & Other Domestic Developments

• Juliana Stratton wins Democratic Senate primary, likely succeeding retiring Senator Durbin.
• Victory perceived as boost for Governor J.B. Pritzker's political capital ahead of a possible 2028 presidential run.

Notable Quotes

• "The primary race tested Pritzker's political clout in a state where he has leveraged his wealth to dominate the Democratic Party." (John McCormick, 10:30)

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Timestamps: Important Segments

• 00:33 – 02:57: Middle East conflict update and initial market assessment.
• 02:58 – 07:09: Emmanuel Koh interview on Wall Street’s reactions, oil, and central bank policies.
• 07:13 – 09:00: Nick Timoros on the Fed, inflation, and policy uncertainty.
• 09:00 – 11:04: USPS/Amazon contract news and Stratton’s primary victory discussed.

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Memorable Moments and Quotes

• On Market Reaction:
  • "The market is pretty comfortable with the view that President Trump cannot afford to have a long-lasting shock and stagflationary heat to the U.S. economy." (Emmanuel Koh, 02:58)
  • "It's not the typical risk off we had in previous oil supply shocks." (Emmanuel Koh, 04:20)
• On Central Banks:
  • "We have a busy week with the Fed... all the main central banks around the world are going to have to tell us what they make of this oil shock..." (Emmanuel Koh, 06:31)
• On the Fed's Dilemma:
  • "What the war does is that it freezes up your ability to make big judgments." (Nick Timoros, 07:26)
  • "Policymakers around the table this week face a question... can they credibly suggest that the next move in interest rates is still more likely to be a move down than a move up?" (Nick Timoros, 08:28)
• On the USPS Crisis:
  • "At our current rate, we'll be out of cash in less than 12 months... the Postal Service would be unable to deliver the mail." (David Steiner, 11:04)

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Episode Tone

The tone is urgent and analytical. The hosts and guests emphasize the seriousness of global risks, while also noting a surprising degree of calm in U.S. financial markets. There’s a blend of cautious optimism, concern about potential complacency, and focus on actionable outcomes for policymakers and investors.

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Conclusion

This episode delivers a concise yet rich analysis of how economic and political shocks—from war to energy prices to postal logistics—are influencing U.S. and global markets. It underscores both the resiliency and the vulnerabilities of current financial systems and highlights the importance of policy decisions in shaping future market trajectories.

Transcript

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[Luke Vargas]

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[Luke Vargas]

Gulf leaders insist on crippling Iran's regime before ending the war. Plus, as fighting drags on, we'll look at why Wall street isn't freaking out, at least not yet.

[Emmanuel Koh]

So we see the shorter this conflict will be, the smaller the impact should be on the economy and the consumer. But as of now, we're actually having a stagflationary risk that is growing by the day without a quick de escalation.

[Luke Vargas]

And bad news for the struggling U.S. postal Service as Amazon plans to take its business Elsewhere. It's Wednesday, March 18th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of what's News, the top headlines and business stories moving your world today. Gulf officials say they want the US to keep up the fight against Iran in order to render it incapable of future attacks, a major pivot from a region that once courted Tehran. Speaking to the Journal, Emirati and Qatari officials described Iran as the belligerent party, citing its attacks on infrastructure and civilian targets, while another senior Gulf official said the only acceptable outcome of the war would be an Iran so enfeebled that it could never imperil its neighbors again. Iranian leaders in recent days have said they'd only accept a ceasefire with the US And Israel if the country received reparations and ironclad guarantees against future attacks. Meanwhile, Iran struck central Israel with missiles overnight, causing heavy damage and killing two people, raising the death toll in Israel since the start of the war to at least 14. And authorities in Iraq report that the U.S. embassy in Baghdad suffered a fresh attack. Without providing more details, the compound was hit by a missile over the weekend and targeted by rockets and drones Monday and Tuesday. Well, with the war dragging on, the effective closure of the Strait of Hormuz sending energy prices soaring and inflation warnings now cropping the world, why are US Equity markets off just a few percentage points since before the fighting started? Emmanuel Koh is the head of European equity strategy at Barclays, and he joins me now to discuss why that is, and whether that trend will continue. Emmanuel Wall Street's reaction thus far has been much less negative compared to past conflicts in the Middle east, in spite of concerns that this all could become a protracted situation. Why is that?

[Emmanuel Koh]

Hey, look, I think the market is pretty comfortable with the view that President Trump cannot afford to have a long lasting shock and stagflationary heat to the U.S. economy. Right. And I think there's still a lot of trauma from investors having sold equities after Liberation Day a year ago, which was a big mistake. So I think investors are hopeful of a swift resolution to this conflict on the view that Trump will ultimately do whatever is good for the US Economy,

[Luke Vargas]

and that includes triggering a swift policy response, pushing in particular the IEA to release all of this oil.

[Emmanuel Koh]

I think this is part of the toolbox. But I guess what we can conclude from Trump communication in the last couple of days is that the oil price has touched its paint threshold. So that was already seen a week ago when Trump was starting to talk about this de escalation after oil price went above $120. Obviously, it's not just about him tweeting about the end of the conflict. We need to see the other parties, whether it's Israel or Iran, willing to support this de escalation effort. So I think this is where we have a bit of question mark about whether the market is too complacent about the outcome of this conflict and whether you could get the situation to worsen before it gets better. So I think what we said is that typically for a 30% move up in oil, we had about 10 to 15% drop in equity market. And so far the global equity market is down only 4%. So it's not the typical risk off we had in previous oil supply shocks.

[John McCormick]

Yeah.

[Luke Vargas]

And we've spoken on the show in recent days about some of the factors that have insulated the US economy in particular from this crisis, more so than the rest of the world. It really helps, for instance, to be a net energy exporter. What else?

[Emmanuel Koh]

Look, I think the US markets, whether it's US equity market or the dollar, have behaved as a safe haven again. Right. And think about this in the context of the past six months where the only game in town was sell America and rotation towards international market. What we saw in the last couple of weeks is the safety of the US market prevailing again. And yes, I think the most hit markets are those which are the most energy sensitive. So we've seen Asian equities, European equities coming down quite a lot more than the US Equity market, which is again less directly impacted by this kind of stagflationary fears. And even if you look at the rate market, we had a pretty hawkish repricing in European rates because now the market is looking for the ECB to hike rate as a consequence of this inflationary shock, while seeing the market is still looking for one cut from the Fed this year. So the market is really seeing that this stagflationary shock will be much more acute in Europe than it will be

[Luke Vargas]

for the US the consumer outlook worsening

[Emmanuel Koh]

in your view, I would say today compared to two weeks ago? Yes, the consumer outlook is worsening because, you know, we have lower growth and higher inflation as a consequence of this oil shock. And again, if you look at gasoline prices going through the roof in the US and some of the sentiment surveys are starting to be hit, right. So we see the shorter this conflict will be, the smaller the impact should be on the economy and the consumer. But as of now, we're actually having a stagflationary risk that is growing by the day without a quick de escalation.

[Luke Vargas]

Emmanuel, I want to talk about central banks. The Fed is making a rate announcement today. Could central banks here inadvertently dial up stagflation fears if it looks like their focus is returning back to fighting inflation instead of supporting growth?

[Emmanuel Koh]

Yeah, absolutely. I think the key will be how central banks around the world respond to this development. And you know, we have a busy week with the Fed. We have the ecb, the bank of England as well, meeting on Thursday and the bank of Japan as well. So all the main central banks around the world are going to have to tell us what they make of this oil shock and whether they are starting to shift away from what has been a pretty dovish communication so far and whether they start to embrace what the market seems to be pricing, which is basically a higher rate in the case of Europe or less rate cuts in the case of the US Emmanuel Koch

[Luke Vargas]

is the head of European equity strategy at Barclays. Emmanuel, thank you so much for being with us on what's news.

[Emmanuel Koh]

Thank you.

[Luke Vargas]

Well, as we mentioned there, the Fed's latest interest rate decision is due this afternoon, an announcement that Journal chief economics correspondent Nick Timoros says comes as officials are contending yet again with a familiar foe, inflation.

[Nick Timoros]

It has a feeling of deja vu for the Fed. First it was the aftershocks of the pandemic. Then it was Russia's war in Ukraine. Last year you had sweeping tariff policy changes and now it's the war in the Middle East. What the war does is that it freezes up your ability to make big judgments. So if you thought the bigger problem before all of this was still in the labor market, you may look at the possible destruction of demand that comes from higher oil prices and say, well, now the labor market is going to be in an even more fragile position, and we should focus on that. If, on the other hand, before this conflict, you were worried that inflation wasn't getting better, you also can look at that and say, geez, inflation was not getting better, it was actually getting a little bit worse. And now we're going to have a new round of potential supply problems.

[Luke Vargas]

While the war is likely to reinforce the consensus around holding rates steady, Nick says there's less clarity about where policymakers should head after that.

[Nick Timoros]

Policymakers around the table this week face a question that would have seemed unlikely a few months ago when they were cutting interest rates. And that question is no longer when will they next cut interest rates? But rather, can they credibly suggest that the next move in interest rates is still more likely to be a move down than a move up? And there were some officials even before this who wanted to get rid of that guidance that suggested that the next move was more likely to be a cut. They wanted to go to a more neutral bias. And so that debate, I think, will continue.

[Luke Vargas]

Today's rate announcement is due at 2pm Eastern, followed by a press conference by Chair Jerome Powell. Coming up, the US Postal Service risks losing business from its largest customer, Amazon. And Illinois Governor J.B. pritzker dodges political embarrassment in a Senate primary. Those stories and more after the break. Every day, the people of Meta work to protect over 3 billion users around the world.

[Emmanuel Koh]

We are responsible for so many products that so many people rely on.

[Luke Vargas]

When you have that level of responsibility,

[Emmanuel Koh]

you take every single decision very, very seriously.

[Luke Vargas]

I am Abhishek and I work on risk and compliance at Meta.

[Emmanuel Koh]

We are definitely ahead of the pack here. We invest a lot more. We really sweat over every single detail.

[Luke Vargas]

Get the facts at Meta. Me, Risk. Illinois's Lieutenant Governor Juliana Stratton has won the state's Democratic Senate primary, putting her in pole position to replace retiring Senator Dick Durbin, who's held a seat since 1997. Tonight, we showed what's possible when you listen to the people and give the people what they want. Journal national political reporter John McCormick says the win is a boost for Stratton's boss, Governor J.D. pritzker, as he eyes a potential White house run in 2028.

[John McCormick]

The primary race tested Pritzker's political clout in a state where he has leveraged his wealth to dominate the Democratic Party. Stratton's victory comes as he's working to raise his national profile with the party's base nationally. Helping elect Stratton could prove useful to Pritzker should he run for the party's nomination after likely securing a third gubernatorial term for himself in November's election. The victory by Stratton could also help soothe some of the bad feelings about Pritzker among members of the Congressional Black Caucus, which had backed another candidate in the race and was critical of the governor's financial involvement backing Stratton.

[Luke Vargas]

If elected, Stratton would become only the sixth black woman to serve in the US Senate. Voice of America could soon be back on the air. A federal judge yesterday ordered that the Trump administration restart the government run outlet after effectively shutting it down last year, putting hundreds of employees back to work. The ruling comes after the same judge last week ruled that Trump's pick to lead the U.S. agency for Global Media, Kari Lake, lacked the authority to slim down VOA's operations. We are exclusively reporting that Amazon plans to slash the number of packages it sends through the U.S. postal Service by at least two thirds as early as this fall. That's after Postmaster General David Steiner solicited bids from Amazon and others for its Last Mile delivery service for the first time. But with Amazon's existing contract ending in October and the results of the bidding not released until the second quarter, we report that Amazon grew concerned it would have little time to adjust operations if its bid wasn't accepted. An Amazon spokesman said that the e commerce retailer initially wanted to increase volumes with the Postal Service, where it's long been the largest customer, and was surprised by the new bidding process. The USPS delivered more than a billion Amazon packages last year, and the pullback comes as its finances are in dire straits. Here was Steiner testifying yesterday on Capitol Hill. At our current rate, we'll be out of cash in less than 12 months, so in about a year from now, the Postal Service would be unable to deliver the mail. If we continue the status quo, Steiner is asking Congress to raise the Postal Service's debt limit and lift regulations on its ability to raise prices for stamps and other services. And finally, celebrations in Caracas, Venezuela, last night beat out the heavily favored U.S. in the world Baseball Classic in Miami, sparking celebrations in cities with large Venezuelan populations, from Santiago to Madrid. Following the win, Venezuela's interim president, Delsey Rodriguez declared today a national holiday while Donald Trump took to Truth Social to suggest making the oil rich nation the 51st state. And that's it for what's news for this Wednesday morning. Today's show was produced by Hattie Moyer. Our supervising producer is Daniel Bach. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening. What's driving the markets this week? What's on investors minds as they look ahead? Find out on the Markets podcast from Goldman Sachs. A breakdown of market moves and macro signals in 10 minutes or less. The Markets podcast from Goldman Sachs. Listen now.