The Stock Market Is A Matter Of National Security
Abstract: On Sunday Trump postponed escalating the Iran war for a five day period. Why five days? Trump might as well have said he was postponing the attacks until the New York stock exchange closing bell rings on Friday afternoon. If the Iran war escalates further, the stock market could increasingly become a matter of national security. The administration could react by giving the national security establishment more influence over the financial system, in hopes of further manipulating financial markets, to win the war.
Overview
President Trump swept to power in November 2024, in part by blaming the affordability crisis on Joe Biden. Rather than tackling the affordability crisis, Trump has called it a hoax and engaged in an unprecedented series of new trade tariffs. However, in the face of declining stock markets, Trump Always Chickens Out (TACO) and the tariff crisis was averted. Yet the tariffs still added to inflationary pressure. On 28 February 2026, Trump made another unconventional decision, again set to make the affordability crisis even worse, launching a war with Iran. Since coming into office for his second term, Trump’s approval rating has declined significantly, from 9% net approval on inauguration day, to 15% net disapproval today, in part reflecting the degrading levels of affordability for ordinary Americans.
AI Is A Matter of National Security
Prior to the launch of the 2026 Iran war, AI was the primary driver of the stock market. The stock market is driven by AI related names, which tend to have elevated valuations based on traditional valuation metrics such as EV/EBITDA. Companies associated with the AI infrastructure buildout and associated energy names have benefited considerably, participating in a massive equity boom. Soaring valuations also help attract talent, with massive pay packets on offer.
This boom is considered by some as necessary for national security purposes. AI is not only the future, but it’s also the future of warfare. America therefore needs to have superior AI capabilities than China and America is winning. The critical tool in ensuring this victory against China is the booming stock market.
Since the AI bubble is required to persist for national security purposes, this gives some AI investors comfort, reducing the risk, knowing the entire national security establishment of the United States is behind the investment and has your back.
Iran War
The launch of the Iran war may further integrate the US stock market with national security considerations. While in some measures, the Iran war has been a success, with the killing of Iran’s most high profile political figures and complete aerial domination over the country, economically, the war is proving to be challenging. Iran has control over the Strait of Hormuz, reducing oil and gas exports from the gulf, causing oil and gas prices to increase. Iran has also fired drones and missiles at the gulf countries, severely damaging their economies. This catastrophic energy crisis has begun to negatively impact the US stock market and perhaps more importantly looks set to have a devastating impact on the affordability crisis.
With the TACO philosophy in mind, Trump is likely to be concerned by declining equity prices. After making escalatory posts, on Sunday 22 March 2026, Trump made a surprise post of Truth Social, saying that “productive conversations” with Iran were ongoing and that he would “postpone any and all military strikes against Iranian power plants and energy infrastructure for a five day period”. Why five days? Five days takes us until Friday. Trump might as well have said he was postponing the attacks until the closing bell on the New York stock exchange rings on Friday afternoon.
Whether the story of negotiations with Iran are real or fake, the Trust Social post sends a signal. Trump doesn’t appear to prioritise the Iranian people, Israeli national security, the security situation for the gulf nations, oil market supply problems in Asia or the affordability crisis at home. The one thing that ranks above all of this is the American stock market. Trump appears to be wanting to calm the markets for a week, to give him some time. Time to review military strategy, time to re-stock or perhaps even, based on our more sceptical thinking, time to review the financial market strategy.
The US is fighting a war with Iran, a war it wants to win and a war that could escalate. One area America appears to be struggling is in the financial markets. If one has an authoritarian mindset, an approach to this could be to attempt to manipulate financial markets for the purpose of winning the war. This could mean greater collaboration between the national security establishment and the financial establishment in the US. Perhaps with the Department of War exercising greater influence over the Federal Reserve or institutional investors, with the aim of mitigating the “damage” caused by Iran.
As with AI investors, this could give some investors in broader equity markets a level of comfort. Afterwall, America has to win the war against Iran and in order to win, the stock market must go up. Therefore, one can invest in US stocks, expecting that the NSA, CIA and Department of War has your back. Valuations could therefore increase further.
Political Volatility
While there is perhaps some scope for Trump to further manipulate financial markets, this may not do much to mitigate the impact of the affordability crisis, which is set to materially degrade due to the Iran war. This may result in a strong result for the Democrats in the midterm elections.
The worsening affordability crisis is likely to lead to increased political volatility. More left wing ideas such as socialism are likely to gain further traction. For instance Zohran Mamdani’s epic victory in New York and California’s proposed wealth tax on billionaires. These left wing ideas may not work in today’s hyper financialised economy driven by investment flows and speculation, with a booming equity market necessary for national security. These socialist ideas designed to reduce inequality could cause a massive stock market crash and economic crash, leading to further political volatility.
Conclusion
Populist ideas gaining traction on the left, could lead to more radical, more authoritarian anti-democratic ideas on the “right”. This could be a more authoritarian form of capitalism, where manipulating the stock market upwards, under the banner of national security, is the only game in town.
If the Iran war escalates and gets worse economically, prepare for the Department of War and the State Department to exercise more influence over the Federal reserve, the CFTC, the SEC and Blackrock. More jobs for Rubio.
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