The clock is ticking for the stock market as the Iran war stretches into a fourth week

The clock is ticking for a stock market that’s been hoping for a speedy resolution to the Iran war but may now have to contend with the possibility of a longer conflict amid reports of additional troops getting deployed to the Middle East. Stocks have been largely calm since the start of the U.S. war in Iran. While the S & P 500 certainly has had a volatile month, pulling back roughly 6% from its recent high, the stock market has yet to price in the possibility of an extended war. The latest headlines could signal a turn for the worse. On Friday, the Wall Street Journal reported that the Pentagon is sending thousands of more Marines and three warships to the Middle East. Axios, citing sources with knowledge of the issue, said the White House is considering plans to occupy Kharg Island to force a reopening of the Strait of Hormuz. And, Bloomberg has reported that Iranian officials are hesitant to even discuss reopening the critical waterway. Absent a clear and swift victory, the rollout of a greater military presence in the area could hurt the stock market and the economy, as the conflict stretches into a fourth week. “If President Trump intends to take Kharg Island, and that requires at least a month for all this to be positioned, it’s highly likely we will have a recession this year,” Marko Papic, macro and geopolitical strategist at BCA Research, told CNBC. By his estimation, the stock market could drop at least 20% in that scenario. Complacency To be sure, there are other reasons investors are expecting a short war. Wall Street firms including Bank of America and Deutsche Bank expect that poor political approval ratings, which are important to President Donald Trump, could mean Washington could de-escalate an unpopular war that could cost Republicans their seats in the midterm elections. BCA Research’s Papic agreed, pointing out that the stock market — which Trump has used in the past as a barometer of his success — could also force the president to back off if equities start to front-run any pain. “The White House, the administration, is unaware of how bad things could get, and that’s because the market hasn’t fallen,” Papic said. “So, I think that if the market front-runs this events and falls, I think the Trump administration may de-escalate instead of trying to take Kharg Island.” Still, others on Wall Street have pointed out that markets have been complacent. This week, Dubravko Lakos-Bujas, the head of global markets strategy at JPMorgan, cut his year-end target for the S & P 500 to 7,200, instead of 7,500. He cited the impact an oil shock could have on consumer demand, which would heighten the risk of a recession. “The point when Oil increasingly starts to hurt S & P 500 is when oil rises by ~30% in a short period of time because households typically need to recalibrate their income and spending habits,” Lakos-Bujas wrote this week. Oil prices have spiked roughly 50% since the start of the Iran war, with the international benchmark Brent crude futures surging to above $110 a barrel. It was last just slightly above that. Holding the line The latest headlines come at a precarious time for the S & P 500, which closed below its 200-day moving average this week for the first time going back to May 2025. The long-term technical indicator is one traders have been watching closely to see whether the broader index can hold at support — or buckle under the weight of greater inflationary pressures. “Hopefully, we can hold on to these moving averages wisely,” Ken Mahoney, CEO of Mahoney Asset Management, said in an interview. Those of the view that the stock market could start to come back here point out that the S & P 500 is about as oversold as could be, with just one quarter of components in the index trading above their 50-day moving averages. Of course, if the S & P 500 fails to hold at its 200-day moving average (at about 6,620), the next major level of support would be at 6,000 to 6,200, JPMorgan pointed out this week. That would be a roughly 6% to 9% slide from where the benchmark was last. “The biggest uncertainty or unknown is, how l o ng is this crisis going to last? Should it linger for much longer, then the related impact on inflation and potentially on growth is what will break the market,” Venu Krishna, head of U.S. equity strategy at Barclays, told CNBC’s “Closing Bell: Overtime” on Wednesday. “But we are not there yet. That’s not our base case,” he added. “You just have to keep your fingers crossed.” Week ahead calendar All times ET. Monday, March 23 10:00 a.m. Construction Spending (January) Tuesday, March 24 8:30 a.m. Unit Labor Costs final (Q4) 8:30 a.m. Productivity final (Q4) 9:45 a.m. S & P Global PMI Manufacturing preliminary (March) 9:45 a.m. S & P Global PMI Services preliminary (March) Wednesday, March 25 8:30 a.m. Current Account (Q4) 8:30 a.m. Export Price Index (February) 8:30 a.m. Import Price Index (February) Earnings: Cintas , Paychex , Raymond James Financial Thursday, March 26 8:30 a.m. Initial Claims (03/21) Friday, March 27 10 a.m. Michigan Sentiment final (March) Earnings: Carnival — CNBC’s Itzel Franco, Fred Imbert and Nick Wells contributed to this report.