Greg Ip

Hey, Kyle.

How are you?

Well, you wake up to a new war in the Middle East and obviously people are worried and that adds to the risk in the whole geopolitical economic situation.

And this comes at a time when people are already kind of on edge about like the AI bubble bursting or maybe everybody losing their jobs to AI, still some inflation pressure out there.

So it kind of adds to an overall mix of anxiety out there.

Now, all that said, I would say that the reaction in the two days of trading we've had since the war began has been muted.

On Monday, oil rose, but it didn't rise as much as a lot of analysts had expected.

Stocks fell off, sold off, but at the end of the day, mostly unchanged.

Tuesday, we wake up and it's almost like a delayed reaction.

It's just, oh, wait a minute, there's a war going on.

Oil goes up some more and stocks fell.

But even so, you know, I've been through a lot of these things over the years.

Right now, it still feels like a muted reaction by the markets to what's going on in Iran.

Sure thing.

So let's talk about the bonds part.

That's a little bit easier to explain.

So when people worry about inflation, for example, because oil prices are going up, they worry that the Federal Reserve will not be able to lower interest rates as much if interest rates aren't going to go down.

That means bond yields are probably supposed to be higher than they already are.

When bond yields go up, prices go down.

And that is exactly what we've seen happen in the last couple of days.