Wall Street’s Safety Net Is Giving Way as Iran War Hits Markets

The Iran war rattled but didn’t break Wall Street this week. Instead it exposed the limits of diversification strategies built to cushion investors against chaos.

Throughout the week, stocks and bonds repeatedly fell together as oil surged and the inflationary shock of a supply disruption pushed Treasury yields higher instead of lower — the opposite of the crisis playbook. The result was the worst combined week for stocks and bonds since the tariff stress last April, and a market that couldn’t decide whether the bigger threat was inflation or an economic slowdown.

On Friday, the collision sharpened: payrolls unexpectedly fell ...