Why Wall Street isn't betting on a wider war in the Middle East
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NMLS ID 1702840. Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Why Wall Street thinks the Middle East conflict will not become a wider war.

I'm David Brancaccio in Los Angeles. As you've been hearing, the situation in the Israel-Iran war is fluid, with Israel now accusing Iran of violating a ceasefire that President Trump had announced late yesterday. Israel is vowing firm retaliation.

Now, players in financial markets continue to take a wait-and-see position. Although crude oil is off its lows from overnight, the price is still down 2.7 percent, 66.65 a barrel. And stock index futures are, at the moment at least, pointing to a strong open on Wall Street. NASDAQ futures are up 1 percent. S&P futures are up 0.8 percent.

I spoke to political risk expert Ian Bremmer before Trump asserted the war was over and indications that it is not. Bremmer is founder and president of Eurasia Group. I started with this question. Why, oh why, are financial markets so

relatively calm in the face of, I'll say it, war. Because of the three belligerents that are fighting right now, the Iranians are actually the most risk averse. And it's because, as Trump says, they don't have the cards. They understand that they can't deter the Americans and the Israelis, and there's very little they can do to damage

the Americans and the Israelis. And that means that as long as their regime is stable and solid, and for now, at least, that appears to be the case, they're very cautious not to precipitate further escalation. Very cautious. Do you think the Chinese have a key role in keeping it that way? Our friends in China get a lot of oil from Iran. Yeah, they do. But it's not that. It's that the Iranians aren't suicidal.

So, I mean, so far, at least, no one has struck the Iranian export facilities at Karg Island, which means they're able to continue to get their oil out. That will stop the moment that the Iranians try to shut down the Straits of Hormuz. The Iranians will find themselves at war with the Americans and the Gulf states if they

They engage in strikes directly against Gulf energy facilities. So you're completely right, David. The Chinese do not want this war to expand, and they certainly don't want disruptions to oil. But that's not the reason the Iranians are being cautious here. Yeah. And also, we have to remind ourselves of the global economics of

crude oil these days. Generally, demand is down, which keeps the edge off prices anyway. Demand is down and supply is high, so much so that the American frackers have been reducing some of their aspirations for expanded drilling. They're not seeing adequate demand given the price point

for their product. And even though there's plenty of geopolitical risk out there globally, there's not a lot of it that's preventing oil from being produced and distributed. Ian Bremmer's Eurasia Group advises corporations and governments on political risk. So oil down, stocks up, and the 100 share index in London is up three-tenths percent, Germany up 1.8 percent.

The chair of the U.S. Federal Reserve begins two days of assessing the economy for Congress today. Middle East tariffs on or off? Will we have a job as the year goes on? This all plays into whether U.S. consumers will buy or wait, which will be wrapped up into a June reading this morning on consumer confidence. Marketplace's Mitchell Hartman has this preview.

After a post-election bump, consumer confidence tanked in early 2025 with President Trump's threatened tariffs and worries they'd spark a return of higher inflation. At the same time, consumers went on a mini spending spree in the early spring, buying up anything they could get their hands on that might get more expensive soon. That was doable for middle and upper income households, says Denny Cohen-Hempsey at Morning Consult. But... Lower income households are a lot more stressed.

And after April, they did pull down their spending quite a bit. There is a slowing labor environment and there is a lot of economic uncertainty. After President Trump paused his threatened tariffs in May, consumer confidence rebounded strongly, but is still below levels at the end of 2024. I'm Mitchell Hartman for Marketplace.

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World leaders are gathering today in the Netherlands for the NATO summit with defense spending front and center, Marketplace's Kimberly Adams reports.

This week, NATO allies are set to agree to boost the amount members spend on their domestic armed forces from 2% of GDP to 5% of GDP. We're talking about hundreds of billions of dollars. I mean, it's a lot of money. Zachary Pakin is a research fellow at the Quincy Institute for Responsible Statecraft. And while President Trump has famously berated NATO members over defense spending... U.S. presidents, dating back to Barack Obama, have been urging Europeans to spend more on defense spending.

You know, it looks like finally they're beginning to take that seriously now. So U.S. pressure is one reason for the boost in spending. And as a result, of course, of Russia's war in 2022 and full-scale invasion of Ukraine, we've seen a significant increase in defense investment.

Anka Agachi is a defense policy analyst at the RAND Corporation. As of last year, 23 out of 32 allies were spending 2%. And I believe this year in 2025, all 32 will be spending minimum 2%.

The NATO members are giving themselves until about 2035 to reach the new 5% target, with 3.5% going to new equipment and the remaining 1.5% to defense-related investments like cybersecurity and infrastructure. Mark Kantzian is a senior advisor at the Center for International and Strategic Studies.

They're trying to build their own capabilities so that they could provide for their own security with maybe the United States as a backup. Member countries will have to decide whether they want to focus on developing their own defense industries or just buy more equipment and weapons on the global market.

The United States has been a major supplier for decades, but also more recently, you see countries like Brazil, South Korea is moving very aggressively. President Trump has said the new spending target won't apply to the U.S., which spends more on its military than the next nine countries combined. In Washington, I'm Kimberly Adams for Marketplace. We're from APM, American Public Media.

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