Episode summary
Pricing the Iran War's Future — Are Markets Right? | Prof G Markets
Prof G Markets
· · 43 min · Hosts: Ed Elson, Scott Galloway · Guests: Katie Martin, Justin Wolfers
Summary
Markets initially treated the war with Iran as a confusing, not yet fully priced shock: oil jumped, then fell back, while bonds, the yen, the Swiss franc, and gold did not behave like a classic flight to safety. Katie Martin said the clearest durable signal is in government bonds, where investors are worried about inflation and about whether US Treasuries still deserve their traditional safe-haven status. Justin Wolfers argued that the point of watching markets is not fascination with portfolios, but getting a forward-looking read when official information is scarce and political messaging is unreliable.
The guests agreed that this looks less like a simple oil shock than a broader war shock layered on top of questions about US competence and credibility. Martin said investors are increasingly “avoiding America” rather than dumping US assets outright, diversifying toward Europe, Asia, and emerging markets. Wolfers pushed the idea further, saying markets may also be pricing a potential “competent shock” if confidence in US institutions keeps eroding.
Both guests said the biggest near-term risk is oil staying elevated, especially if the Strait of Hormuz remains constrained. Martin argued the economy can probably absorb oil around $80-$90, but $150-$200 a barrel would be a different, more dangerous regime. Wolfers warned that the deeper issue may be whether the conflict, and the presidency’s unpredictability, exposes a far larger geopolitical and institutional break.
Key takeaways
- Katie Martin said investors are not dumping the US in bulk, but are increasingly avoiding incremental exposure to America and diversifying elsewhere.
- Justin Wolfers argued that markets are a forward-looking information system because normal news coverage is too broken to verify what is happening in real time.
- Martin said bond markets are the most important tell right now because they are highly sensitive to inflation and to any loss of confidence in US Treasuries.
- Wolfers said the market reaction is not irrational because investors are reacting to unannounced intentions, allies, and exit plans in an unusually unpredictable war.
- Both guests said $150 to $200 oil would be a materially worse scenario than the market is currently pricing.
- Martin said Trump and Scott Bessent both care about oil, gasoline, and bond yields, which may be helping restrain policy decisions.
Notable quotes
“what we need therefore is a forward-looking indicator. Bets on the future. And so, that's what financial markets are”
“Bonds hate inflation. It's like kryptonite. They just do not like it up and at all”
“the nightmare scenario for central bankers, for finance ministers around the world and and honestly for investors is that we do get $150 oil and it stays there”
How the episode opens
Today's number 42. That's the average age of a new hire in America today. The highest number ever.
Standard benefits now include a 401k rollover and a referral to an orthopedic specialist. Welcome to Profy Markets. I'm Edson.
It is March 11th. Let's check in on yesterday's market vitals. The major indices initially climbed as oil shock fears were tempered, but they ultimately closed flat.
Crude oil prices declined, the dollar fell, and Bitcoin jumped above $70,000. Okay, what's happening? The war with Iran is escalating.
US Defense Secretary Pete Hgse told reporters at a Pentagon press conference on Tuesday that Iran was quote badly losing. Today will be yet again our most intense day of strikes inside Iran. The most fighters, the most bombers, the most strikes.
Intelligence more refined and better than ever.
Hexist comments came just hours after President Trump suggested the war would end, quote, very soon. However, Trump also warned that the US would hit Iran quote 20 times harder than they have been hit thus far if Thrron stops the flow of oil through the Strait of Hormuz. An Iranian official said the country is quote absolutely not seeking a ceasefire.
At least 20 countries are now militarily involved, making it one of the biggest conflicts since the Cold War. Meanwhile, the energy market is on edge. The strait of Hormuz remains effectively closed and Abu Dhabi's Rouise refinery, one of the biggest in the world, halted operations after a drone strike nearby.
Saudi Aramco CEO Amen Naser warned of quote catastrophic consequences if the war drags on and oil has continued its volatile ride. Brent crude after spiking to $119 on Monday fell to $85 by midday Tuesday. So, we have lots to talk about.
We are joined by another expert panel.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- iran war markets
- bond market signals
- interest rates
- economic outlook
- market pricing
Watch the episode
Watch “Pricing the Iran War's Future — Are Markets Right? | Prof G Markets” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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