Wizman: Expecting Iran Conflict to Intensify Over Next 3 Weeks

0:00Welcome back to Opening Bell. We are looking at some down hours again now. So fifth week in a row of losses and to welcome in and have a conversation about this Terry Weissman global FX and rate strategist at Macquarie Group. Thank you so much for being with us. Your biggest worry these days is that folks are trying to talk about the end of the Middle East conflict, the war and looking towards brighter days at the same time. We're losing some ground. Some of your thoughts? Well, I'm also concerned to call about the next three weeks and not so much the next three years. We still have to get through the next three weeks before we can even start thinking about the longer term. And I'm highlighting the next three weeks in part because if you recall, the White House through the press spokesman just a few days ago said that the total duration of the war may be about six weeks at the outside, but we've gotten through four weeks of it, which means that the next two to three weeks, we will still

1:00have intensive combat. And I suspect this is the case as well, because if you're going to meet that six week deadline and that's going to require that there is a settlement some concession, let's say, to the US's terms and conditions. The US may simply have to be forced or compelled to intensify the war to bring the other side to bring Iran to the back to the table in a way that they start to make some real concessions. So, you know, it's human nature, of course, that as a deadline approaches, the flurry of activity to meet that deadline only intensifies. And now we have that deadline effectively two or three weeks away. I expect an intensification of the war and combat before there's a cessation may be around mid-April or mid to late April. That's what worries me right now. What could what form can that intensity take? Obviously, it could be the use of ground troops in Iran by the US. It could be more attacks on

2:03more critical infrastructure than we've already seen by Iran on the Gulf States. It could be an attempt on the part of the US to seize some of the key strategic islands in the Persian Gulf. It could be an attempt by the US to try to seize the highly enriched uranium that the Iranians still have. All of these things are still on the table. They have not happened yet. And if they're going to happen, they're going to have to happen at the point of maximum pressure, which is over the next three weeks. I suspect that when you see headlines pertaining to this intensification on the evening news, markets will not take this well. We can see a lot more volatility in the next three weeks. We could see new multi-week lows in the stock market before we finally see some settling out, maybe in a few weeks. Well, that's what I want to get to. I think you're making a good point there about lows and what we are expecting. For example, you know, if the pressure is on for another few weeks, as you're noting, I said we're losing ground and I meant about the market. I mean, I wasn't talking about what's

3:05going on in the war to be clear. So, look, three months of stock market, the S&P's down 6%, one month a month to date, it's down 6%. That loss is basically this month. Do you expect lower lows? And then I want to get to some of the commodities that you want to focus on. But, you know, right now, when you're looking at 6400 or so, you know, what do you think is a low point on the S&P? Well, all of this depends on the duration of the war. And it also depends critically on the extent to which oil prices will go up. If the war abides by, or let's just not call it the war so much as combat, because that's really what's critical here, intensive combat. If that ends around mid-April, we may see oil prices go no higher than $150 per barrel on Brent. We may see the stock market maybe lose another two or three or four percent at most. And then we set a lot. We potentially can have a resumption of gains

4:05in the stock market and decline in oil prices. Slowly admittedly, because it's going to take time for a girl to come back online and normalize, but at least we can form a bottom. The main issue is what if this, if this endures for longer than two or three weeks? I don't think that's going to happen because I think that if post a period of intensification, let's say around mid-April to mid to late-April, there will be a meeting of the minds. I think the political contours around the world, the geopolitical contours around the world are going to force both sides to come back online. We're going to have a meeting with another in the event that intensification of the board is not lead to something that looks like a surrender by a ran. If that doesn't happen, can we go lower? Of course we can go lower. We can go anywhere from 10 to 20 percent lower on the S&P 500. Let's say if oil prices do not come down, if they sustain in the area of $150 to $200 per barrel into the end of the year, because there is no cessation of hostilities and there's no opening of the

5:05stock market. I think that would be great. Yeah, okay. I'd like to jump in. So when I asked you, you know, the low on the S&P, I thought maybe you would say something like we could go down another 5 percent, but I'm not going to ask that. What I'm going to ask you is where do you see copper and oil headed near term? Maybe you could throw up some numbers. What you're highlighting is actually very interesting because some commodities, interestingly enough, have risen alongside the price of some commodities have fallen. Copper is one of the commodities that has actually fallen. And that's very interesting because what it seems to suggest is that there is a slowdown in global activity taking place that is going to affect adversely the price of cyclically sensitive commodities like copper. Other commodities like agriculture, for example, iron, which are energy intensive to produce or mine have actually moved up in concert with oil. Some commodities like copper, which are linked to the growth story and the cyclical story

6:07globally have come down. So I would say yes, of course copper can continue to come down if oil prices go up, but not because there's a direct link because the link is through the slowdown in global growth that could take place as oil prices continue to climb. So in keeping with the view or the fear that this could be a long and extended war, there's more downside to copper just as it's more downside to the global economy. I feel pressed to ask you, is there actionable opportunity for investors if so, what would you advise? You said the market could go lower, copper could go lower, if oil goes higher, iron could go higher. What's your advice these days? You're the pro, Terry, tell us something, give us something to sink our teeth into here. Yeah, of course one cannot form a view on the markets without forming a view, a critical view on the war right now. And I don't necessarily want to

7:08issue a point estimate on when this war will end. What I want to do, however, is keep the keep the keep attention on the headlines because those will provide the clues. If one believes that this war is going to end soon, of course, one would jump back into the market. And of course there are going to be opportunities in a post-war environment, including opportunities with respect to the reconstruction effort, for example. So anything that has to do with global construction, for example, anything that has to do with under sea repair, under sea infrastructure, for example, potentially also the move away from conventional hydrocarbons into alternative energies could get a boost as a result of the sentiment change in light of the war. So these are all good plays to look for, but you look for them after the war ends because during this period of intense hostility and combat, everything, all the correlations go to one, everything moves together. That happens to be cyclical, like stocks, like oil prices,

8:08like credit, and what you buy and what you sell does not make that much of a difference. What makes more of a difference is getting the timing right on the rebound. All right, so we got the lead at the end. What we should have said in our first sentence, which I think is very actionable vice, is do nothing until the war ends, says Terry Weissman. Stay put and jump in at the end, and when the war ends, whenever that is, by reconstruction stocks, infrastructure stocks. So I appreciate that. Terry Weissman, thank you, global effects and rate strategists at McQuarrie. Thank you. Thank you.