Markets Tumble as Iran Tensions Rise, FOMC Looms — Solar Stocks Slammed, Dollar Surges

Tuesday’s market session saw sharp downside across equities, led by the Nasdaq, as Trump’s Iran comments spooked traders and economic data disappointed. The dollar broke out, solar stocks crashed, and the VIX spiked. All eyes now shift to Wednesday’s FOMC and the growing uncertainty in the Middle East.

Today’s session was marked by heavy selling, cautious flows, and a hard pivot toward downside protection as traders navigated geopolitical headlines, weak economic data, and shifting rate expectations.

🔻 Market Overview

All major indices closed red on the day, with the Nasdaq leading to the downside. A midday wave of selling was triggered by President Trump’s statement confirming U.S. involvement in recent Iran-related operations. That comment, combined with already cautious positioning, weighed on risk assets.

The VIX spiked above 21, its highest reading since April, while the VVIX surged, signaling traders are scrambling for downside hedges. Despite the pullback, retail remains cautious, and institutional flows are growing more defensive.

☀️ Sector Spotlight: Solar Gets Slammed

The Renewables sector, particularly solar, was one of today’s biggest losers after the Senate GOP unveiled a bill to prematurely end solar and wind tax credits—favoring nuclear instead. The result? A brutal day for clean energy names, with solar names deep in the red.

Meanwhile, energy bulls had something to cheer about: Oil prices spiked on rising Middle East tensions, and XLE/XOP buyers stepped in. Goldman even noted this was the most active spot oil ETF (USO) flow since the 2020 oil crash. A true rotation moment.

🏦 Flows & Trading Desk Activity

Goldman Sachs reported low trading activity (4 out of 10 on their scale), but what stood out was the sell skew across large orders: • LOs (Long-Only) had a 32% sell skew, particularly offloading Macro Expressions, Tech, and Healthcare, while modestly accumulating Consumer Staples and Communication Services. • Hedge Funds (HFs) were also net sellers, though more active buyers in Staples, Energy, and Materials.

📉 Notably, heavily shorted stocks reversed Monday’s squeeze and tumbled hard, with Goldman’s VIP/Most Shorted Index seeing its best HF relative performance in a month.

🧮 Macro Data: Retail Sales Miss

Both Retail Sales (-0.9%) and Industrial Production (-0.2%) surprised to the downside today, signaling potential contraction ahead. This helped fuel today’s dollar surge while pressuring equities, particularly consumer-linked names.

💵 Dollar Breakout & Rate Expectations

The U.S. Dollar Index surged, posting its strongest move in six weeks as market participants positioned for no near-term Fed cuts and a potentially weakening economy. • Gold held flat despite the dollar strength. • Silver outperformed, erasing all of gold’s relative gains since Liberation Day. • Bitcoin saw a sharp drop below $104,000 before rebounding.

Treasury yields declined across the curve, with long-end bonds outperforming.

🧠 FOMC Positioning

The market has fully priced out the chance of a surprise cut at tomorrow’s FOMC meeting. 2025 rate-cut expectations have now fallen back to just 45 basis points, while 2026 remains much more optimistic with a higher cut forecast. In other words: don’t expect the Fed to blink just yet.

What did GAR do Today?

We chose to sit on the sidelines today again. With rising geopolitical risk with a potential read bad Iran conflict and the FOMC decision just hours away, the risk-reward for new entries simply wasn’t there. We already have positions on the board in options, and adding more without a clear directional edge didn’t make sense.

Sometimes, the best move is no move—especially ahead of a market holiday on Thursday. Staying patient is part of the game plan.

🧭 Final Thoughts

Tensions abroad, weak U.S. data, and political headlines have all contributed to a cautious tape. The leadership is narrow, solar got smoked, and everyone’s watching for clues in tomorrow’s Fed commentary.

Until then, risk management is the name of the game. – GAR Capital Team