Stocks fell and government bonds sold off this morning, as the reality of the war set in with investors. S&P 500 futures were down 1.6%. Nasdaq futures were down 2.3%.

• The global benchmark oil price Brent Crude spiked another 7% overnight and is now trading near $84 a barrel.
• European natural-gas prices were up by more than 20%, and the European Stoxx 50 was down 3.5% this morning.
• The dollar was a bright spot of sorts, edging slightly higher in value against other currencies. (More on that below.)

The latest: The U.S. Embassy in Riyadh was attacked by two drones, resulting in a limited fire and minor material damage to the building, Axios' Barak Ravid reported overnight.

• The State Department called on Americans to "DEPART NOW" from more than a dozen Middle East nations "due to serious safety risks."
• The U.S. closed its embassies in Saudi Arabia and Kuwait this morning.

Catch up quick: The spike in oil and gas prices seems to be driven in part by the remarks of an Iranian commander who threatened yesterday to attack any ship crossing the Strait of Hormuz.

• "The Strait (of Hormuz) is closed. If anyone tries to ​pass, the heroes of the Revolutionary Guards and the regular navy will set ​those ships ablaze," Ebrahim Jabari, senior adviser to the Guards commander-in-chief, ⁠said in remarks on state media.

Reality check: It's one morning. The stock market has been fairly complacent all year, amid all manner of turbulence. Yesterday's early morning fears gave way to calm. Stay tuned.

An experiment in democratizing private markets looks to be on the way out: Retail investors don't seem to have the stomach for it.

The big picture: What happened with Blue Owl, a private credit firm that had retail investors clamoring for their money back, sparking a mini crisis that was a PR mess for the company, sent its stock price down sharply, and rattled investors about the entire sector.

The latest: Blackstone is allowing investors to redeem a record 7.9% of shares from its flagship credit fund, Bloomberg reports, as requests from investors for their money gain steam.

Zoom in: Blue Owl is exhibit A for a particular segment of private credit: business development companies, or BDCs, a structure created by Congress decades ago to funnel investments to smaller businesses.

• They're often publicly traded and attract many ordinary, or retail, investors.

By the numbers: Around 40% of Blue Owl's $307 billion of assets under management come from individuals, according to the Wall Street Journal, which is more than typical in this space.

• The company's stock is down nearly 30% this year.

Flashback: Last fall, JPMorgan Chase CEO Jamie Dimon warned about private credit after a lender collapsed.

• "When you see one cockroach, there's probably more," he said. That led to a raft of pieces worrying about another financial crisis.

Reality check: Anytime something big is falling apart in lending, people draw parallels to 2008.

• But what happened back then was seismic. The crisis involved most of the housing market, where nearly 70% of Americans owned a home. For most, their house was their biggest asset, the main source of their wealth.

Zoom out: Private credit, for all its new inclusion of retail investors, is just not that big. That doesn't mean it's calamity proof, to be sure. But context matters.

Zoom in: Private creditors have more flexibility to restructure loans.

• They don't just lend money. They also take equity stakes and hold loans themselves, says David Robinson, a finance professor at Duke's Fuqua School of Business, who has done some research here.
• "The resolution of financial distress is easier to facilitate," he tells Axios.

Follow the money: Also, crucially, these funds are usually gated. You can't just get all your money back.

• That's good for these credit companies because they're not at risk of a classic bank-run style event — go watch "It's A Wonderful Life" again — when everyone races to get their money back and the whole thing falls apart.

Between the lines: Some firms offer "semi-liquidity," set times where investors can get some cash out. It's a good way to attract that sweet sweet retail money.

• But Blue Owl's kerfuffle showed a pretty clear downside to the strategy.

State of play: "The non-sophisticated investor is learning a very valuable lesson," says Joseph Brusuelas, chief economist at RSM US.

• Allocating capital into opaque, hard-to-understand markets should be the province of a select number of investment or capital markets professionals, he says.
• But there's another learning opportunity here, he adds, for policy folks who are now weighing whether or not to include these kinds of investments into regular people's 401(k)s.
• There should probably be a pause on those considerations, he says.

The caveat: Wall Street is hardly giving up on drawing more retail investors into private credit.

• Blackstone plans to offer a new publicly traded fund that would let individuals invest in the data center boom, Bloomberg reported.

The bottom line: Bringing private credit to the people may have been overrated.

The U.S. dollar index, a benchmark that measures the dollar against other currencies, strengthened this morning amid the Middle East conflict.

Why it matters: It's a sign that investors still view the dollar as a safe harbor in a storm, even when the U.S. is the one at the center of it.

Reality check: The index fell sharply last year after President Trump unveiled his "Liberation Day" tariffs. It still hasn't recovered to levels since before then.

The bottom line: Although there's been more attention on the euro and yen this year, nothing can match the dollar's dominance.