Market strategist Ed Yardeni has raised the probability of a market meltdown to 35 per cent as the escalating war involving Iran drives oil prices above $100 a barrel, threatens inflation and complicates policy decisions for the Federal Reserve
Veteran market strategist Ed Yardeni has raised the probability of a sharp selloff in global equities this year, warning that the escalating conflict involving Iran could trigger an oil shock and destabilise financial markets.
In a note to clients, Yardeni said the likelihood of a “market meltdown” in 2026 has risen to 35 per cent, up from 20 per cent earlier, reflecting mounting concerns that a prolonged war in West Asia could push inflation higher, weaken consumer spending and erode corporate profit margins.
At the same time, he slashed the odds of a “meltup” — a market rally driven largely by investor enthusiasm rather than fundamentals — to 5 per cent from 20 per cent.
Oil shock clouds outlook
The strategist said the expanding conflict in West Asia has already rattled global markets after crude oil prices surged above $100 per barrel for the first time since 2022.
The spike in energy costs is raising fears of persistent inflation just as growth begins to slow, complicating policy decisions for the Federal Reserve.
“The US economy and stock market are stuck between Iran and a hard place currently. So is the Fed,” Yardeni wrote.
“If the oil shock persists, the Fed’s dual mandate would be stuck between the increasing risk of higher inflation and rising unemployment.”
Markets already under pressure
Investor sentiment has weakened sharply as geopolitical tensions escalate. Futures linked to the S&P 500 dropped 1.6 per cent in early Asian trading on Monday, signalling further pressure on equities.
At the same time, hedge funds have been adding short bets on US stocks amid the global selloff.
The US dollar has emerged as a major beneficiary of the turmoil, strengthening against most major currencies over the past week, while other perceived safe havens such as US Treasuries, the Japanese yen, the Swiss franc and gold have struggled to gain momentum.
‘Roaring 2020s’ still the base case
Despite the rising risks, Yardeni maintained that his broader outlook for the US economy remains relatively upbeat.
His base-case scenario — dubbed the “Roaring 2020s” — still carries a 60 per cent probability through the end of the year. The framework assumes a decade of strong economic expansion supported by productivity gains and technological innovation.
Over the longer term, he assigns an 85 per cent chance that the Roaring 2020s expansion will continue, while placing a 15 per cent probability on a “stagflating 1970s redux” marked by weak growth and stubbornly high inflation.
“If investors start expecting stagflation, a bear market is more likely,” he warned.
Trump’s ‘roaring economy’ faces early tests
Yardeni’s warning comes at a time when the US economic narrative is already under scrutiny.
Donald Trump had projected 2026 as a banner year for growth, repeatedly describing the US economy as “roaring like never before”. However, recent data has raised doubts about that optimism.
The US labour market showed fresh weakness in February, with 92,000 jobs lost, reversing earlier gains and highlighting volatility in employment trends. Since Trump returned to office in January 2025, the economy has shed roughly 202,000 jobs outside the healthcare sector, according to recent estimates.
Energy prices have also surged following the Iran strikes that began on February 28. US gasoline prices have jumped about 19 per cent in a month to roughly $3.45 per gallon, according to data from AAA.
Analysts at Goldman Sachs have warned that US inflation could climb from 2.4 per cent in January to around 3 per cent if oil prices remain elevated.
The White House has acknowledged short-term disruptions linked to the conflict but maintains that the administration’s economic policies will deliver stronger private-sector investment and growth in the coming months.
End of Article
Leave a Reply