War Returns to the Middle East
Understanding a week that ended with the most significant US military action since 2003
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The week began with anticipation of Nvidia earnings and ended with American bombs falling on Tehran. On Saturday, February 28, the United States and Israel launched joint strikes on Iran in what may prove to be the most consequential geopolitical event since the 2003 Iraq invasion. Iran's Supreme Leader Ayatollah Ali Khamenei was killed. Iran retaliated immediately, striking US bases across the Gulf. The Strait of Hormuz is partially closed. Markets will not reopen to the same world they closed in.
Everything in this letter needs to be read through that lens. The analysis of what happened before Saturday matters — but what comes next is uncertain in ways that transcend normal market volatility.
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The week's events feel almost absurd in retrospect. On Tuesday, Trump delivered a record-breaking State of the Union, defending his tariff policy and making implicit threats toward Iran. On Wednesday, markets focused on Nvidia earnings. On Thursday, Nvidia fell 5.5% despite beating estimates. On Friday, hot PPI data sent stocks lower as the S&P 500 closed out its worst February since March 2025.
And then Saturday happened.
The strikes came despite — or perhaps because of — three rounds of indirect talks between US and Iranian negotiators. Geneva discussions on Thursday had shown "progress," but Trump's patience had evidently run out. The attack targeted military installations, IRGC bases, and the supreme leader himself. This was not a limited strike like June 2025. This was something else entirely.
Iran's retaliation was immediate and widespread: missiles and drones hit US bases in Bahrain, Kuwait, Qatar, and the UAE. The Strait of Hormuz, through which 20% of global oil flows, was partially closed. 150 ships are reportedly stranded.
Markets will gap significantly when they reopen Sunday night. Oil could surge $10-20 per barrel. Gold is likely to spike toward $5,400-$5,500 or higher. Equities will face immediate selling pressure. The VIX will jump.
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What Happened Before Saturday |
Nvidia's "Sell the News" Moment
Despite beating on every metric — $68.1B revenue (+73% YoY), $1.62 EPS (+82% YoY), and Q1 guidance of $78B vs. $72.8B consensus — Nvidia fell 5.5% on Thursday. Markets interpreted the results as "priced in." CEO Jensen Huang defended AI capex sustainability, but investors questioned whether anything could justify the growth already embedded in the stock. The reaction dragged down the broader tech sector.
Hot PPI Reinforces Inflation Concerns
Friday's Producer Price Index came in much hotter than expected (+0.5% monthly vs. +0.2% expected). Combined with last week's core PCE at 3.0%, this reinforces that inflation remains sticky. Fed rate cuts continue to be pushed back.
February's Negative Close
The S&P 500 ended February down ~1%, its worst month since March. The Nasdaq fell more than 3%. Only the Dow managed positive territory (+0.2%). The software sector has been devastated — IGV down ~23% YTD as AI disruption fears compound.
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Market-by-Market Highlights |
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US30 (Dow Jones) |
Friday Close: 48,978 |
The Dow fell 521 points Friday (-1.05%) as hot PPI and private credit concerns weighed on financials. Bank stocks dragged heavily — American Express fell 8%, Goldman Sachs dropped 7.6%. The index closed below 49,000 for the first time since mid-February. War escalation will create significant pressure when markets reopen.
Price action suggests: The break below 49,000 signals caution. Watch 48,500 and 48,000 as key support levels. Gaps lower are likely Sunday night.
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Gold (XAUUSD) |
Friday Close: ~$5,200 |
Gold rallied throughout the week, recovering to $5,200 on rising Iran tensions. The metal proved prescient — those buying ahead of the weekend were rewarded with what may prove to be significant gains when markets reopen.
Price action suggests: Gold's rally to $5,200 was justified by Saturday's events. Expect significant gaps higher — potentially toward $5,400-$5,500 in initial reaction. The January high of $5,595 becomes the next major test.
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WTI Crude Oil |
Friday Close: $67.02 |
Oil hit seven-month highs above $67.80 intraday Friday before settling at $67.02. The geopolitical risk premium dominated despite a 16-million-barrel inventory build (largest in three years). Friday's price was before Iran strikes and Strait of Hormuz closure.
Price action suggests: Oil is likely to surge $10-20+ at open. $75-80 is realistic near-term; $100 possible if Hormuz remains blocked or conflict extends. Energy stocks will likely gap higher.
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EUR/USD |
Friday Close: ~1.1800 |
The euro consolidated near 1.18 all week, unable to break directionally as traders awaited Iran clarity. The tight range suggests accumulation before a significant move.
Price action suggests: War escalation typically supports dollar initially. Watch 1.1760 support — a break lower could extend toward 1.16. Only a reclaim of 1.19 would shift bias bullish.
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GBP/USD |
Friday Close: ~1.3550 |
Sterling remained under pressure, stuck in the 1.35-1.36 range with no meaningful attempts to reclaim higher ground. UK-specific factors are secondary to global risk sentiment.
Price action suggests: Safe-haven dollar demand likely keeps pressure on cable. The 1.35 level is critical support. Break below opens 1.33-1.34.
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USD/JPY |
Friday Close: ~155.80 |
USD/JPY ground higher toward the 158-160 intervention risk zone. The pair closed near 155.80 after testing above 156 mid-week.
Price action suggests: Competing forces — safe-haven yen demand vs. rate differentials. Watch for potential spike lower initially, but sustained direction depends on broader risk appetite.
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USD/CAD |
Friday Close: ~1.3700 |
The pair remained in tight equilibrium between oil strength (CAD positive) and safe-haven USD demand. The 1.36-1.37 range held all week.
Price action suggests: Oil's expected surge should benefit CAD significantly, potentially pushing USD/CAD lower. However, safe-haven flows may limit loonie gains.
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→ Looking Ahead
| MAR 1 | OPEC+ Meeting — must address war disruption |
| SUN NIGHT | Markets reopen — expect significant gaps |
| MAR 5 | February Jobs Report — first clean read since shutdown |
| ONGOING | Iran conflict evolution — THE dominant theme |
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Final Thought
There are weeks when market analysis feels adequate to the moment. This is not one of them.
Saturday's events have fundamentally altered the geopolitical landscape. The United States is at war with Iran. The region's most powerful state leader is dead. Oil infrastructure critical to global trade is under threat. The consequences will unfold over days, weeks, and months — not in a single trading session.
What I can tell you: the analysis we've done all week — Nvidia earnings, PPI data, technical levels — remains valid as baseline information. But it is now secondary to developments that transcend normal market logic.
When markets reopen Sunday night, there will be chaos. Oil will spike. Gold will surge. Risk assets will sell. The dollar will likely strengthen on safe-haven demand. These are educated guesses based on historical patterns during geopolitical shocks.
What happens after the initial reaction depends on questions we cannot answer: Will the conflict be contained or escalate? Will the Strait of Hormuz reopen? Will OPEC+ respond with emergency production? Will Iran's retaliation trigger broader regional war?
In moments like this, the value of patient, disciplined trading is not in predicting the unpredictable — it's in preserving capital until clarity emerges. The opportunities will come. The question is whether you're positioned to take them.
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Trade carefully. Manage your risk with extraordinary diligence. And remember that markets will eventually normalize — even if the path there is chaotic.
— Fed'n Markets
This newsletter is for educational purposes only and does not constitute investment advice. Markets are in an extraordinary period of uncertainty. Manage your risk accordingly.
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Sources
• Federal Reserve, Bureau of Economic Analysis, Bureau of Labor Statistics
• CNBC, Bloomberg, Reuters, Yahoo Finance (market data and reporting)
• CNN, PBS, Al Jazeera, BBC (geopolitical reporting)
• Trading Economics, FXStreet, Forex.com (technical analysis)
• Council on Foreign Relations, UN News (policy analysis)
• Wikipedia, Axios, NPR (event documentation)
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