Aletho News

Iran war will leave long-term ‘scar’ on Wall Street, investors warn

Al Mayadeen | April 10, 2026

Investors have warned that the US-Israeli war on Iran will leave “scar tissue” in global markets, with commodity prices and bond yields unlikely to quickly return to prewar levels even if a lasting deal is reached.

Energy prices remain far above prewar levels even after the United States and Iran announced a fragile two-week ceasefire on Tuesday, with investors saying that damage to Gulf infrastructure and the loss of confidence after Tehran’s de facto closure of the Strait of Hormuz will weigh on any recovery.

“It goes beyond the reopening of the Strait of Hormuz. I think there would be longer-lasting scar tissue that would need a higher risk premium in markets, even if a permanent ceasefire was agreed,” said James Vokins, head of core income and investment grade credit at Aviva Investors.

Markets rallied but remain fragile

Stocks and bonds tumbled throughout March as US and Israeli attacks on Iran led Tehran to close the narrow waterway through which a fifth of the world’s oil and gas transits. Markets rallied quickly on the truce, with European government bonds and stock markets posting their best day for years on Wednesday.

Yet the international oil benchmark Brent crude remains nearly 35 percent higher than its price on the eve of the war, despite falling sharply in recent trading sessions. Bond yields, which have surged as traders slashed their bets on interest rate cuts by major central banks, remain elevated.

The yield on the interest rate-sensitive two-year Treasury note is 0.4 percentage points higher than it was before the aggression began. In Europe, where energy-importing economies are particularly vulnerable to global oil prices, yields have risen even further. Two-year yields in the United Kingdom, Germany, and Italy remain more than 0.5 percentage points higher than they were on the eve of the war.

A worse outlook than before the war

Bill Papadakis, macro strategist at Lombard Odier, said: “Even if the ceasefire proves to be a lasting one, the conflict was long enough, and leaves enough damage behind, that any reasonable macro scenario as of today looks meaningfully worse than the pre-conflict outlook.”

The US dollar and Treasuries have historically been seen as risk-free assets, used around the world for reserves. But President Trump’s alienation of allies and the ballooning national debt, made worse by the war on Iran, has lifted risk levels on those assets.

“Absolutely there is a bigger risk premium priced into US assets than before the war,” said George Pearkes, macro strategist at Bespoke Investment Group.

International investors losing confidence in the dollar

Andrew Jackson, head of investments at Vontobel, said his firm’s clients were increasingly concerned about the US dollar. “International investors are worried about the US dollar because of debt sustainability and the US’s relationship with the rest of the world. The US dollar curve is probably not the risk-free curve now,” he said.

Bill Campbell, a bond portfolio manager at DoubleLine, added that the conflict had encouraged him to further diversify away from the United States.

As the war on Iran enters its seventh week, the economic consequences continue to ripple outward. Even with a temporary ceasefire in place, investors are warning that the damage done to global markets and to confidence in US assets may not be easily repaired. The “scar tissue” that Aviva’s Vokins spoke of could take years to heal, if it ever does.

For the United States, a country already burdened by record debt and a president who has alienated traditional allies, the long-term cost of this war may be measured not only in dollars, but in the erosion of the very foundations of its economic power.

April 10, 2026 - Posted by aletho | Economics, Militarism, Wars for Israel | Middle East, United States, Zionism