Michael Hartnett, Chief Investment Strategist at Bank of America, pointed out in his latest Flow Show report that domestic political pressure in the United States will force the Iran war to cool down in March. If the situation cools down, it is advisable to sell oil and the dollar, and buy 30-year U.S. Treasury bonds, while risk assets are expected to bottom out and rebound in March.
Currently, U.S. oil prices have surged by 45% and gasoline prices have risen by 15%, which has pushed Trump's economic approval rating down to 40% and inflation approval rating down to a low of 36%. Hartnett believes that the Iran conflict is politically unsustainable, and Trump must turn the situation around before the midterm elections, which means there will be a cooling window in March.
Once the situation cools down, Hartnett provides clear trading guidance: sell oil at the price level of $90/barrel, sell the dollar when DXY is above 100, and buy 30-year U.S. Treasury bonds at a yield level of 5%, while risk assets are expected to bottom out in March.
On Monday, Brent crude oil briefly approached the $120 mark before retreating, with the latest quote at $107.
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At the same time, Hartnett mentioned that if the conflict escalates, the U.S. will ensure oil supply and maintain dominance in AI technology, with oil, the dollar, and U.S. technology and military sectors being favored; oil-importing countries such as South Korea, Japan, and Europe will be under pressure, especially the banking sectors in Japan and Europe, which will face significant retracement risks.
<h2>Political Clock Countdown: Midterm Election Pressure Determines War Pace</h2>
Hartnett's core logic is based on a pragmatic political judgment: Trump's governance foundation is being directly eroded by rising oil prices. Currently, Trump's approval rating on economic issues has fallen to 40%, and his approval rating on inflation issues has dropped even lower to 36%, both returning to low levels.
Meanwhile, U.S. oil prices have cumulatively risen by 45% since the outbreak of the conflict, and retail gasoline prices have increased by 15%, with inflation pressure being transmitted to ordinary voters in the most direct way.
In Hartnett's view, this makes a prolonged Iran conflict politically unsustainable. The reality of midterm election pressure requires Trump to reverse this situation, and an increase in Trump's approval rating before the second quarter is a prerequisite for risk assets to gain upward space.
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<h2>Cooling Trade: Sell Oil, Sell Dollar, Buy Long Bonds</h2>
Hartnett believes that the cooling of the Iran situation will trigger the following trading logic: sell oil at the price level of $90/barrel, sell the dollar when DXY is above 100, and buy 30-year U.S. Treasury bonds at a yield level of 5%, while risk assets are expected to bottom out in March.
At the same time, he emphasized that a &#34;brief war&#34; will reactivate the long logic of inflation-prosperity benefiting assets: commodities and small-cap stocks in emerging markets will benefit from the restart of the dollar bear market.
However, Hartnett holds a cautious attitude towards a comprehensive rebound. He pointed out that for a new stock market high to occur, three conditions must be met: sufficient accumulation of short positions, a panic shift in policy, and a reversal of liquidity peak expectations.
Currently, none of these three conditions are mature, and the S&amp;P 500 index has not experienced sufficient price clearing (such as falling below 6,600 points), with the overall market position still leaning towards bullish.
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<h2>Upgraded Trading: Oil Prices, the Dollar, and U.S. Tech Stocks Benefit</h2>
Hartnett clearly outlined another path: if the situation in Iran continues to escalate rather than cool down, the asset allocation logic will undergo a fundamental reversal.
In an escalation scenario, the U.S. will fully intervene to ensure oil supply security and support the energy needed for AI infrastructure, with benefiting assets switching to: crude oil, the dollar, U.S. tech stocks, and the global defense sector. The cost will be borne by oil-importing countries, including South Korea, Japan, and Europe.
Hartnett specifically pointed out that in an escalation scenario, the biggest risk lies with Japanese and European bank stocks. Previously, these two markets were seen as core benefiting sectors in this round of market trends.
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<h2>The Dollar is the Key Barometer: DXY Breaking 100 Indicates a Global Liquidity Turning Point</h2>
Hartnett provided a framework for the &#34;end of correction&#34;: when external shocks combine with excessive optimism, three things usually need to be satisfied: &#34;oversold assets bottoming,&#34; &#34;overbought assets being sold,&#34; and &#34;safe-haven assets losing buying interest.&#34; In his view, the price behavior of the first two has shown signs, but oil and the dollar remain key to giving the 'full clearing signal.'
Among all variables, Hartnett lists the dollar as the core asset currently worth paying attention to, defining the dollar exchange rate (DXY index) as the &#34;best global liquidity barometer.&#34;
He believes that if DXY breaks above 100, it indicates that the peak of the global central bank rate-cutting cycle has emerged. On January 1st, the market expected a 100% probability of the Federal Reserve cutting rates on June 17th, which has now dropped to 37%. Additionally, a stronger dollar will lead to a flattening of the yield curve and potential inflationary shocks.
This framework implies that the direction of the dollar is not only an exchange rate signal but also a core indicator for judging the global liquidity turning point, the Federal Reserve's policy path, and whether risk assets can truly stabilize

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Rising oil prices have pushed Trump's economic approval rating down to 40% and inflation approval rating down to a low of 36%. The midterm elections may force him to cool down the US-Iran conflict in March. The chief of Bank of America believes that investors should sell crude oil at the price level of $90/barrel, sell the dollar when DXY is above 100, and buy 30-year US Treasury bonds at a yield level of 5%. Risk assets are expected to bottom out in March

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Is it time to sell oil? Bank of America Hartnett: Trump must win the midterm elections, and the US-Iran war must "de-escalate" in March