Chapter 1: What is the main topic discussed in this episode?
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Based on average new for sale and rental listings July 2024 through June 2025. Number one trusted based on August 2025 proprietary survey among real estate professionals. 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.
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 clearly having a stagflationary risk that is growing by the day without a quick de-escalation. 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 U.S. 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 U.S.
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 up around the world, why are U.S. equity markets off just a few percentage points since before the fighting started?
Emmanuel Coe 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?
Hey, look, I think the market is pretty comfortable with the view that President Trump is
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Chapter 2: What are Gulf leaders' demands regarding Iran's regime?
cannot afford to have a long-lasting shock and stagfationary hit 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 U.S. economy.
And that includes triggering a swift policy response, pushing in particular the IEA to release all of this oil.
Chapter 3: Why is Wall Street remaining optimistic during the ongoing conflict?
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, what 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. Yeah, and we've spoken on the show in recent days about some of the factors that have insulated the U.S.
economy in particular from this crisis, more so than the rest of the world.
Chapter 4: What risks are associated with a prolonged conflict in the Middle East?
It really helps, for instance, to be a net energy exporter. What else? the U.S. markets, whether it's U.S. equity market or the U.S. 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 U.S.
market prevailing again.
Chapter 5: How does the war impact the U.S. Postal Service and Amazon's business?
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 U.S. 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 stagfationary shock will be much more acute in Europe than it will be for the US. The consumer outlook worsening in your view? I would say today compared to two weeks ago, yes.
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 as they are going through the roof in the U.S. 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 are clearly having a stagflationary risk that is growing by the day without a quick de-escalation. 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? 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 mainstream 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 cut in the case of the U.S.
Emmanuel Koh is the head of European Equity Strategy at Barclays. Emmanuel, thank you so much for being with us on What's News. Thank you. 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.
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.
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Chapter 6: What factors are influencing the U.S. equity markets amidst global tensions?
Following the win, Venezuela's interim president, Delce 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.