War gains, long-term pain: Wall Street's core business at risk due to Iran war

“War gains, long-term pain: Wall Street's core business at risk due to Iran war Submitted by Ali Jaswal on Thu, 05/07/2026 - 12:45 Rising oil prices and market volatility have boosted trading profits, but the gains mask threats to long-term growth Traders on the floor of the New York Stock Exchange react as stocks slide on 10 March 2026, due to the war on Iran (Michael M. Santiago/Getty Images/AFP) Off Wall Street may be profiting from the US and Israeli war on Iran , but short-term gains due to rising oil prices and market volatility are causing a slowdown in dealmaking – threatening its core business, market analysts have told Middle East Eye. Within a few days of the US and Israel starting the conflict, oil prices saw a massive spike , while market volatility lifted trading revenues and energy-linked stocks. Defence shares also rallied on expectations of higher military spending, while banks reported stronger trading income amid the turmoil. But experts have told MEE that those gains have masked some underlying weakness. While Wall Street's first-quarter earnings have looked strong, they largely reflect deals struck before the first strikes against Iran on 28 February, and the war's impact on dealmaking is only now beginning to show. "Wall Street has done meaningfully less well out of the Iran war than might meet the eye," Ilya Spivak, head of global macro at tastylive, a US-based financial media and trading platform, told MEE. Wall Street executives are now warning that the war on Iran is complicating transactions, delaying IPOs, and threatening the pipeline of mergers, acquisitions and new stock listings. On the first day of trading after the war erupted, Brent crude jumped 8.6 percent to around $72, lifting major oil companies such as ExxonMobil and Chevron. Heightened volatility drove a surge in trading activity, with Goldman Sachs reporting a 48 percent increase in investment banking fees, to around $2.84bn. While much of that reflected pre-war deal pipelines, the bank acknowledged that the conflict had boosted trading revenues. Trading can't replace dealmaking Defence stocks also rallied initially, with Northrop Grumman, RTX Corporation and Lockheed Martin all posting gains. But the momentum has proved uneven. Several firms have since struggled, and the broader aerospace and defence sector has remained largely flat for the year. Energy stocks have similarly lost ground after peaking in March. 'Letting this conflict drag on is not in Wall Street's interest' – Mir Mohammad Ali Khan, former chairman of KMS Investment Bank According to Spivak, recent market rebounds are "more driven by opportunistic attempts to 'buy the dip' in Mag7 stocks rather than reflecting actual war-related upside for companies". Mag7, or the Magnificent 7, refers to seven dominant tech companies: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla, which have played a crucial role in driving market growth. According to Spivak, the pullback highlights a deeper issue: trading revenues cannot fully replace dealmaking. Trading is more infrastructure-heavy and generates thinner margins than advisory and underwriting work. "Increased volatility can help offset a slowdown in dealmaking, but its thinner margins – of 25 to 45 percent, compared with those for investment banking of 45 to 65 percent – mean that you need about $1.50 in trading revenue to make up $1 of dealmaking revenue," Spivak said. Iran war wreaks havoc on global economy and could spark recession, says IMF Read More » Dealmaking has already taken a hit. US-announced mergers fell roughly 23 percent to 1,795 deals as of early March, reflecting both pre-existing weakness and war-driven uncertainty. Goldman Sachs' CEO David Solomon acknowledged that IPO activity slowed in March, while seven of the 10 largest listings of the quarter fell below their offer price within a month. "The disruption runs deeper than Wall Street's earnings headlines suggest,” Javed Hassan, a former investment banker who worked in London and Hong Kong with the investment banking subsidiary of Swiss Re, told MEE. He noted that banks with large trade finance operations, including Citigroup, HSBC and Standard Chartered, have flagged rising counterparty risks in commodity-linked deals. "The difficulty is not just energy prices, it is that no one can write a contract with confidence when the baseline keeps shifting," Hassan said. "That uncertainty is the supply chain dimension Wall Street's earnings headlines are not yet capturing." A familiar pattern but a different outcome War-driven market disruption is not new. Previous conflicts, including the Iraq war and Russia's invasion of Ukraine , triggered declines in equity markets, widening credit spreads and sharp slowdowns in IPO activity. But according to Mir Mohammad Ali Khan, the founder and former chairman of KMS Investment Bank at 110 Wall Street, the Iran war is different because of its impact on global energy flows through the Strait of Hormuz. The real reason Iran and the US cannot end the war: Money Read More » "Previous conflicts, including the wars in Afghanistan and Iraq , did not have the long-term direct impact on US financial markets," Khan told MEE. "Letting this conflict drag on is not in Wall Street's interest," he added. Executives are saying the second quarter will be the real test, after the first period fully exposed to the war's effects. "Looking ahead, planning, engagement and pipelines remain healthy, but of course, developments in the Middle East could have an impact on deal execution and timing," JPMorgan CFO Jeremy Barnum said . Citigroup CFO Gonzalo Luchetti warned that a prolonged conflict could introduce "risk of deferrals" later in the year. The concern reflects the scale of disruption. Before the war, around a quarter of global seaborne oil and 20 percent of liquefied natural gas passed through the Strait of Hormuz, a route effectively shut since early March. The Dallas Fed has described the conflict as the largest geopolitical oil supply shock on record, estimating that removing nearly one-fifth of global supply could cut global GDP growth by 2.9 percentage points in a single quarter. 'Wall Street's interest is in the war continuing, not stopping' - Alex Krainer, market analyst More than two months into the war, the economic impact is already being felt in the US. Energy costs rose 10.9 percent in March, while petrol prices climbed above $4 a gallon, pushing inflation to 3.3 percent – well above the Federal Reserve's target. "This is a one-quarter blip where the effects of it really weren't being felt, but I don't really see how this is sustainable," William D Cohan, a former senior Wall Street M&A investment banker at Lazard Frères & Co, Merrill Lynch and JPMorganChase, told MEE. When profitability falls, he said, it affects companies’ willingness to pursue deals or borrow. "People like to say Wall Street is not Main Street, [but] Wall Street is highly correlated to Main Street," Cohan added. War could undermine growth Rising costs are already feeding through to the US economy. Treasury yields and mortgage rates have climbed, increasing borrowing costs and limiting the Federal Reserve's ability to cut rates. "The single most important factor determining the trajectory of stock prices is the central bank's monetary policy," Alex Krainer, a Europe-based market analyst, commodities expert and former hedge fund manager, told MEE. "Stock markets are going higher not because the economy is growing… but because the Federal Reserve is flooding the financial system with liquidity." If the war continues to fuel inflation, he warned, the dollar's purchasing power will erode, meaning apparent market gains may not translate into real wealth. 'If [Wall Street] were able to install their own puppet in Tehran, all that wealth could become their collateral' – Alex Krainer, market analyst The IMF has already downgraded global growth forecasts and warned that prolonged disruption could push the world close to recession. For Wall Street, which depends on stable growth and cheap capital, that poses a direct threat to dealmaking. "Look, Wall Street is a confidence game," said Cohan. "It's a hard thing to bet against, but at some point investors, corporations, CEOs are going to have enough of this, and they are going to pull back." That risk matters because Wall Street's fortunes are closely tied to broader economic policy. A prolonged war that sustains inflation and suppresses dealmaking could undermine expectations of growth. Market sensitivity to the conflict has also been carefully managed, with major escalations often occurring over weekends, giving investors time to absorb shocks before trading resumes. Still, not all analysts believe Wall Street is pushing for a swift end to the conflict. "Wall Street's interest is in the war continuing, not stopping. I don't think they will exert meaningful pressure on the Trump administration for a ceasefire – probably quite the contrary," Krainer said. Drawing on conversations within financial and policy circles, he argued that resource control, rather than security, was a key driver. "Wall Street's objective is primarily to take down the regime in Tehran," he said. "Iran is the fifth richest nation in the world in terms of natural resources, estimated at $30 trillion. If they were able to install their own puppet in Tehran, all that wealth could become their collateral." For Wall Street, he believes, the long-term prize outweighs any short-term losses the war is inflicting on its balance sheets. War on Iran New York City News Post Date Override 0 Update Date Mon, 05/04/2020 - 21:19 Update Date Override 0

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