Markets Brace for Israel’s Next Move

An uneasy calm

Investors are breathing a sigh of relief on Monday. Global stocks are in the green and oil prices have retreated from last week’s gains after Iran’s unprecedented drone and missile attack on Israel was mostly neutralized in the skies. But the calm could be short lived, as world leaders and markets focus on Israel’s response.

Military clashes don’t always sink the markets, as was the case when Hamas attacked Israel in October and Israel retaliated. But many on Wall Street fear the economic impact from hostilities in the Middle East and in Ukraine. “We may be entering one of the most treacherous geopolitical eras since World War II,” Jamie Dimon, JPMorgan Chase’s C.E.O., warned last week.

Benjamin Netanyahu is facing intense international pressure not to retaliate. The United States, the Group of 7 nations and Arab states are urging restraint. “Take the win,” President Biden reportedly told Israel’s embattled prime minister after the attack was rebuffed with American help. Iran has signaled that the attack was a one-and-done, but Israel’s war cabinet hasn’t indicated its next move. Meanwhile, the government’s hawkish wing is calling for a quick and aggressive response.

“A meaningful Israeli retaliation in the next 48 hours does indeed remain on the table,” Helima Croft, the head of global commodity strategy at RBC Capital Markets and a former C.I.A. analyst, wrote in an investor note last night.

Escalation could roil the oil market. Brent crude, the global benchmark, has risen roughly 18 percent this year, accelerating in recent weeks as tensions in the Middle East have heated up. Some on Wall Street see oil topping $100 per barrel, which could have the cascading effect of reigniting inflation, scrambling the Fed’s timeline for cutting interest rates, and hurting Biden at the polls.

But on Monday, there’s calm. European stocks and U.S. futures are up slightly, with shares in defense companies, including Saab and Leonardo, jumping after markets opened, and Lockheed Martin gaining in premarket trading. The aviation sector is a wild card. Much of the airspace over the Middle East was reopened on Sunday, but flight cancellations abound.

The attack puts the spotlight on Iranian drones. The country’s relatively cheap Shahed drone — which was a big part of Tehran’s weekend barrage and costs just thousands to make — has helped turn Iran into a major global arms dealer. Most of the Shaheds were shot down by Israel’s and its allies’ more sophisticated defenses. But that protection is expensive — one estimate put the price tag to defend the latest attack at about $1 billion.

The Iranian attack may be a dry run for future action. Some defense experts see Saturday’s assault as a kind of live test to determine whether Iran’s weapons could penetrate superior Western defenses. Autonomous drones, powered by artificial intelligence, are already rewriting the military playbook in the Ukraine war, where Shahed drones play a big role.

HERE’S WHAT’S HAPPENING

CVC Capital Partners announces I.P.O. The Luxembourg-based firm is seeking a valuation of up to €15 billion ($16 billion) in a long-anticipated listing on the Amsterdam stock exchange. CVC is aiming to raise more than €1.25 billion in a listing that is seen as a vote of confidence in the markets despite geopolitical uncertainty.

Apple’s iPhone shipments fall sharply. The tech giant has lost its lead as the world’s biggest smartphone maker by volume to Samsung after shipping roughly 50 million of the devices last quarter, according to IDC, or about 10 percent below estimates. The decline is the largest falloff since 2022, when Covid lockdowns hit supply chains.

Tesla to reportedly lay off 10 percent of its work force. Elon Musk announced the cuts in an internal memo to staff members, according to Electrek. Tesla sales hae been falling in the face of an intensifying price war and rising competition from Chinese rivals.

It’s not just the economy

Donald Trump will appear in a New York court on Monday, becoming the first former president to stand criminal trial. The case begins as polls show his lead over President Biden has almost evaporated. The shifting fortunes suggest that November’s rematch could once again upend the old rules of what matters most to voters.

Trump is accused of falsifying records to cover up a sex scandal. Jury selection begins on Monday to decide if he concealed a hush-money payment to the porn star Stormy Daniels after she threatened to go public about their affair when he ran for president in 2016. Trump denies the charges.

Bad news is piling up for Trump. The latest Times/Siena poll shows that Biden has almost erased Trump’s lead. The two candidates are in a virtual tie, with Trump at 46 percent to Biden’s 45 percent.

Biden is gaining ground despite worries about the economy. Conventional political wisdom says that the economy is the top concern for voters, and Trump scored a better grade on that front in the poll. Last week’s hotter-than-expected inflation report added to skepticism about Biden’s economic management (even though the U.S. is outperforming peers on most metrics).

But other issues seem to be cutting through. Biden has shored up support among Democrats since last month’s State of the Union address, and worries about his age are fading as concerns about a second Trump presidency rise. The Biden campaign, which has a huge financial lead over the Republican, is ramping up advertising in battleground states.

Trump is betting that he can defy the odds. He will most likely seek to spin any verdict to his benefit. Given the scandals that plagued his first run for the White House, no one would write him off this time. Watch the share price of Trump Media, which has become a kind of proxy on the MAGA movement’s faith in Trump’s chances.

Even critics are falling in line. Gov. Chris Sununu of New Hampshire acknowledges Trump’s part in fomenting the Jan. 6 insurrection and that he could be convicted. Still, Sununu said he would vote for him. “This trial is not going to have major political ramifications that a lot of people think it may have. When it comes to these issues, people see it more as reality TV at this point,” Sununu told ABC’s “This Week” on Sunday.

An old Facebook fight comes back to life

When Facebook bought Palmer Luckey’s Oculus VR for $2 billion in 2014, it cemented him as a tech founder to watch. Three years later, he left the social media giant after coming under fire for donating to an organization that spread anti-Hillary Clinton memes and he reportedly threw his support behind Donald Trump.

Nondisclosure agreements mean the full story of his departure from Facebook has never been made public. Luckey has since started Anduril Industries, a defense company backed by the likes of Marc Andreesen.

But the dispute burst back into the open this weekend, in a series of exchanges on X with Andrew Bosworth, the C.T.O. of Facebook parent Meta. DealBook picks out some choice exchanges:

Bosworth: I have absolutely no idea about palmers politics now or then and defended him publicly inside the company when people were agitating around them.

Luckey: Great story to tell now that I have dragged myself back to relevance, but you aren’t credible.

You retweeted posts claiming I donated to white supremacists, and a post saying that anyone who supports Trump because they don’t like Hillary Clinton is a s****y human being.

You publicly told everyone my departure had nothing to do with politics, which is absolutely insane and obviously contradicted by reams of internal communications. It is like saying the sky is green … but don’t try to be the apolitical hero.

Bosworth: Not claiming to be apolitical, I certainly have my own politics probably different than yours, but internally at the time I certainly was clear I thought no employment consequences should come from someone’s political beliefs and people asking about it at Q&A were out of line.

Luckey: I am down to throw it all out there. We can make everything public and let people judge for themselves. Just say the word.

The myth of free tax prep

It’s tax day, and that is reigniting the debate about tax fairness, the $34 trillion national debt, and whether the winner of this year’s presidential election should consider extending Trump-era tax cuts — or leave them to expire at the end of next year.

It’s also an occasion to review America’s complicated tax code. Politicians on both sides of the aisle loathe the lengthy forms that taxpayers must fill out. Several presidents have vowed to simplify the process and make it less costly.

America’s tax-preparation industry has continuously blocked these efforts. Intuit, H&R Block and other tax-prep specialists have spent heavily on lobbying against Washington’s efforts to demystify the filing process.

They’ve also fought back against free tax-prep options, including one being tested by the I.R.S. The industry’s own free versions have run into consumer and congressional pushback as they’d been rendered off-limits for millions of tax filers. The companies have since largely abandoned the free services, The Times Opinion team details in a new video.

And yet there are few options open to taxpayers. “What these companies are doing is standing astride the highway that everybody needs to travel and collecting tolls,” said The Times’s Binyamin Appelbaum.

The week ahead

It’s a busy week for earnings and economic data, starting on Monday with U.S. retail sales. The I.M.F. and World Bank also kick off their annual spring meetings.

Here’s what else to watch:

Tuesday: China releases first-quarter G.D.P. figures. Bank of America, Morgan Stanley, United Airlines, Johnson & Johnson, LVMH and United Healthcare deliver results. Elsewhere, a new batch of housing data is set for release.

Wednesday: All eyes on the Fed beige book, which details economic activity across 12 regions and should offer fresh insight into the U.S. economy. On the earnings front, there’s ASML, the chip equipment maker.

Thursday: Netflix, Blackstone and TSMC, the Taiwanese chip maker, report results.

Friday: Crypto watchers will be keeping an eye on the “Bitcoin halving,” a quadrennial occurrence in which production of the token shrinks, potentially affecting market prices.

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