Geopolitical Tensions Threaten Bull Market Under Trump

Escalating conflict with Iran could force the Federal Reserve's hand, putting the historically pricey stock market at risk.

Apr. 18, 2026 at 8:06am

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An extreme close-up of heavy, industrial banking equipment and machinery, conveying the fragility of the financial system in the face of global unrest.The looming threat of a stock market crash casts a shadow over the nation's financial machinery as geopolitical tensions disrupt the delicate balance of supply and demand.Cleveland Today

Statistically, the stock market tends to rise under most presidents, but under Donald Trump, annualized gains in the Dow, S&P 500, and Nasdaq have been among the best of any president. However, headwinds are mounting, and the probability of a stock market crash under Trump is climbing - with the blame potentially lying with the president's actions in Iran.

Why it matters

The Iran war has led to the largest energy supply disruption in modern history, causing a significant increase in fuel prices for consumers and higher transportation/production costs for businesses. This could force the Federal Reserve to halt its rate-easing cycle and shift to rate increases, which would be dangerous given the stock market's historically pricey valuation.

The details

Trump's actions in Iran have led to the closure of the Strait of Hormuz, disrupting 20% of global oil demand. This has caused crude oil prices to skyrocket, resulting in higher inflation. The Federal Reserve may be forced to raise interest rates to combat this, which could upend the bull market given the stock market's nosebleed valuation premiums.

  • On Feb. 28, U.S. military forces, along with Israel, commenced attacks against Iran at Trump's command.
  • Shortly after these operations began, Iran closed the Strait of Hormuz to virtually all oil exports.
  • As of April 11, shipping traffic through the Strait of Hormuz hasn't returned to normal.

The players

Donald Trump

The former president whose actions in Iran have led to the largest energy supply disruption in modern history, potentially forcing the Federal Reserve's hand and threatening the historically pricey stock market.

Jerome Powell

The chair of the Federal Reserve, who has repeatedly pointed to the stickiness of Trump's tariffs in the goods sector as a reason inflation has remained above 2%.

Federal Open Market Committee (FOMC)

The 12-person body, including Fed Chair Jerome Powell, responsible for adjusting the nation's monetary policy.

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What they’re saying

“Although no short-term directional moves in Wall Street's major stock indexes can ever be predicted with concrete accuracy, the probability of a stock market crash under Donald Trump is climbing -- and the blame may lie with the president.”

— Sean Williams, Author

What’s next

If the FOMC halts its rate-easing cycle and shifts to rate increases, the probability of a stock market crash will rise considerably.

The takeaway

The escalating conflict with Iran and its impact on energy prices could force the Federal Reserve to raise interest rates, putting the historically overvalued stock market at risk of a significant correction under President Trump.