The financial market took a long, cautious breath on Monday...
It exhaled just enough to push stocks 1% higher after a bruising few weeks.
For a moment, the tension in the Persian Gulf seemed to ease as President Donald Trump announced a five-day postponement of strikes against Iranian power plants. Trump cited "constructive talks" and a potential nuclear breakthrough.
Although Iran was quick to deny any direct or indirect contact with the U.S. administration, it didn't matter. The mere suggestion of a pause was enough to spark a much-overdue relief rally. (Though markets then reverted and finished yesterday slightly lower.)
We'll let the news outlets keep you updated on the ever-changing situation in the Middle East. That isn't our focus today. What we're keeping tabs on is a silent threat in this geopolitical chess match...
Inflation.
While the headlines focus on missiles and diplomatic denials, another story is being written in the cost of moving goods across the globe. The strife in the Persian Gulf has delivered a textbook supply shock... It's the kind of event that can transform a stable economy into a high-inflation furnace almost overnight.
The conflict is disrupting shipping operations, straining global supply chains, and driving oil prices higher. We can see the results already in the numbers...
The Baltic Dry Index, which tracks the cost of moving raw materials by sea, is up 26.7% year over year.
CRB industrial prices – essentially the cost of the materials used to build everything from skyscrapers to appliances – have risen 8%.
And oil prices have surged nearly 40% in the past 30 days alone.
These are all signs of renewed inflation risk.
If you looked at the February consumer price index ("CPI"), you might think we're in the clear. The headline number showed a relatively mild 2.4% growth.
However, the CPI is a rearview mirror. It tells you where we were, not where we're going.
Supply shocks tend to show up first in energy and freight... then ripple across a wider range of goods and services.
If conflict in the Persian Gulf persists, the pressure we're seeing in input and transport costs today will likely work its way into headline CPI inflation in the months ahead.
While government stats remain contained, the prices you pay at the local market tell a different story. Below you'll see my internal inflation monitor – from my Income Intelligence newsletter – which tracks prices on everything from oil to electricity to even a men's bike at Walmart.
As you can see, my monitor shows we're in an inflationary environment...
Twelve of our 19 measures signal inflation at the moment... And things might get worse if the conflict drags on.
Of course, the market cares about inflation because of interest rates. When inflation rises, the Federal Reserve has a harder time justifying rate cuts. And if inflation gets too high, the Fed might raise rates, as it did in 2022 and 2023.
This is important because high interest rates are kryptonite for the stock market.
They make borrowing more expensive for companies, raise mortgage and credit-card costs for consumers, and, most importantly, reduce the present value of future corporate earnings. When rates are high, investors demand more immediate profits and lower valuations.
The conflict in the Middle East seems to change just about every day. But while markets may have celebrated a five-day reprieve in military action, inflation could still soar from here.
We'll keep you updated in future issues.
In the meantime, if you'd like a more in-depth look at what's going on in the market, you should check out Income Intelligence. My internal inflation monitor I shared above is just the tip of the iceberg.
Each month, I also cover which bonds offer the best yields, the top 10 trades you can make, what I think about a specific income investment, and so much more. And all of that market analysis is in addition to my usual stock recommendations.
My goal is to show you how to safely earn high income... no matter what the market is doing.
With the inflation threat getting worse by the day, that's now more important than ever. Click here for all the details on how I can help you grow your wealth.
What We're Reading...
- Something different: U.S. weight-loss drugmakers slash prices in fight to win customers.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
March 25, 2026