Wall Street executives are warning that the US-Israeli war on Iran is freezing the dealmaking that drives their core profits, Middle East Eye reported on May 9. US-announced mergers fell roughly 23 percent to 1,795 deals by early March, and IPO activity slowed sharply as energy costs and market volatility made contract-writing nearly impossible. “No one can write a contract with confidence when the baseline keeps shifting,” former investment banker Javed Hassan told the outlet.
The numbers tell a split story. Goldman Sachs posted a 48 percent jump in investment banking fees, reaching roughly $2.84 billion, Middle East Eye reported. Much of that haul reflected deals inked before the first strikes hit Iran on February 28.
The war’s true drag on new business is only now surfacing. David Solomon, Goldman Sachs’ CEO, acknowledged the chill. IPO activity slowed in March.
Seven of the quarter’s ten largest listings fell below their offer price within a month. The pipeline looks healthy on paper, but execution is another matter. “Wall Street has done meaningfully less well out of the Iran war than might meet the eye,” Ilya Spivak, head of global macro at tastylive, told Middle East Eye. Trading desks saw a windfall from the initial volatility.
Brent crude jumped 8.6 percent on the war’s first trading day. Defense stocks rallied. Energy names like ExxonMobil and Chevron surged.
That momentum faded fast. The broader aerospace and defense sector has stayed largely flat for the year. Energy stocks lost ground after peaking in March.
Spivak called recent market rebounds “more driven by opportunistic attempts to ‘buy the dip’ in Mag7 stocks rather than reflecting actual war-related upside.”
Trading cannot replace advisory work. The math is unforgiving. Trading margins run 25 to 45 percent.
Investment banking margins sit at 45 to 65 percent. Spivak told Middle East Eye you need about $1.50 in trading revenue to replace every dollar of lost dealmaking income. The infrastructure costs are heavier.
The payoff is thinner. Behind the earnings headlines lies a deeper disruption. Javed Hassan, a former investment banker who worked with Swiss Re’s investment banking arm in London and Hong Kong, flagged rising counterparty risks.
Banks with large trade finance operations—Citigroup, HSBC, Standard Chartered—are seeing commodity-linked contracts wobble. “That uncertainty is the supply chain dimension Wall Street’s earnings headlines are not yet capturing,” Hassan told Middle East Eye. The Strait of Hormuz sits at the center of the crisis. Before the war, roughly a quarter of global seaborne oil and 20 percent of liquefied natural gas passed through the waterway.
That route has been effectively shut since early March. The Dallas Fed labeled the conflict the largest geopolitical oil supply shock on record. Removing nearly one-fifth of global supply could cut global GDP growth by 2.9 percentage points in a single quarter.
Mir Mohammad Ali Khan, founder and former chairman of KMS Investment Bank at 110 Wall Street, drew a sharp contrast with past wars. “Previous conflicts, including the wars in Afghanistan and Iraq, did not have the long-term direct impact on US financial markets,” he told Middle East Eye. The Iran war is different because it directly chokes global energy flows. “Letting this conflict drag on is not in Wall Street’s interest,” Khan said. The economic blowback is already hitting American households.
Energy costs rose 10.9 percent in March. Petrol prices climbed above $4 a gallon. Inflation ticked up to 3.3 percent, well above the Federal Reserve’s target.
Treasury yields and mortgage rates climbed in response. The Fed’s room to cut rates shrank. William D.
Cohan, a former senior M&A investment banker at Lazard Frères, Merrill Lynch, and JPMorganChase, drew a direct line from rising costs to the dealmaking freeze. When profitability falls, companies pull back from pursuing deals or taking on debt. “People like to say Wall Street is not Main Street, [but] Wall Street is highly correlated to Main Street,” Cohan told Middle East Eye. “It’s a hard thing to bet against, but at some point investors, corporations, CEOs are going to have enough of this, and they are going to pull back.”
JPMorgan CFO Jeremy Barnum offered a cautious forward look. “Planning, engagement and pipelines remain healthy, but of course, developments in the Middle East could have an impact on deal execution and timing,” he said. Citigroup CFO Gonzalo Luchetti warned a prolonged conflict could introduce “risk of deferrals” later in the year. The second quarter will be the real test—the first full period exposed to the war’s effects.
Not everyone believes Wall Street wants the war to end. Alex Krainer, a Europe-based market analyst, commodities expert, and former hedge fund manager, told Middle East Eye that resource control, not security, is a key driver. “Wall Street’s interest is in the war continuing, not stopping,” he said. “Iran is the fifth richest nation in the world in terms of natural resources, estimated at $30 trillion. If they were able to install their own puppet in Tehran, all that wealth could become their collateral.”
Krainer argued the long-term prize outweighs short-term balance-sheet pain. The IMF has already downgraded global growth forecasts. Prolonged disruption could push the world close to recession.
For Wall Street, which depends on stable growth and cheap capital, that is a direct threat. The policy says one thing. The reality says another.
Market sensitivity to the conflict has been carefully managed, with major escalations often occurring over weekends to give investors time to absorb shocks before trading resumes. Why It Matters: The Iran war’s chokehold on the Strait of Hormuz is not just an energy story—it is a credit market story, an IPO story, and a Main Street inflation story rolled into one. When bankers cannot price risk because the baseline keeps shifting, the pipeline of mergers, acquisitions, and stock listings freezes.
That freeze ripples into pension funds, retirement accounts, and the borrowing costs American families face on mortgages and car loans. Key takeaways: - US-announced mergers fell roughly 23 percent to 1,795 deals by early March, with IPO activity slowing sharply as war-driven uncertainty made contract-writing nearly impossible. - Trading revenue cannot fully replace dealmaking income—margins are 25 to 45 percent versus 45 to 65 percent for advisory work, requiring $1.50 in trading revenue to replace $1 of lost dealmaking. - The Strait of Hormuz shutdown removed nearly one-fifth of global oil supply, pushing US inflation to 3.3 percent and limiting the Federal Reserve’s ability to cut interest rates. - Some analysts argue Wall Street’s long-term interest lies in regime change in Tehran to unlock an estimated $30 trillion in natural resources, outweighing short-term balance-sheet losses. Executives at JPMorgan and Citigroup are already warning of deferrals and execution risk.
If the Strait of Hormuz remains closed through the summer, the dealmaking drought will deepen. Watch for IPO postponement announcements and merger withdrawals in the coming weeks. The Federal Reserve’s next policy move hangs on whether war-driven inflation forces its hand.
For working families, the question is simpler: how long until $4 gasoline becomes the new floor, not the ceiling.
Key Takeaways
— US-announced mergers fell roughly 23 percent to 1,795 deals by early March, with IPO activity slowing sharply as war-driven uncertainty made contract-writing nearly impossible.
— Trading revenue cannot fully replace dealmaking income—margins are 25 to 45 percent versus 45 to 65 percent for advisory work, requiring $1.50 in trading revenue to replace $1 of lost dealmaking.
— The Strait of Hormuz shutdown removed nearly one-fifth of global oil supply, pushing US inflation to 3.3 percent and limiting the Federal Reserve's ability to cut interest rates.
— Some analysts argue Wall Street's long-term interest lies in regime change in Tehran to unlock an estimated $30 trillion in natural resources, outweighing short-term balance-sheet losses.
Source: Middle East Eye
