In contrast, any indication of a significant retaliatory response from Iran, or disruptions in oil and gas supplies, will keep volatility levels high. This scenario would drive oil prices and safe-haven assets such as gold and U.S. Treasury bonds further up, with a notable decline in high-risk assets like stocks and cryptocurrencies.

A sudden shift in market mood: from optimism to caution

The Israeli strike marked a sharp turn in market sentiment, which had been characterized by optimism on the night before the attack. Optimism regarding the technology sector and declining inflation had been pushing the market towards risk-taking, but the direct strike on Iran turned this narrative upside down.

This scenario is reminiscent of previous flashpoints such as the assassination of Qassem Soleimani in 2020 and the tanker attacks in 2019, where markets reacted initially in a similar manner with rising oil prices and strength in U.S. Treasury bonds and the Swiss franc.

The key now lies in how contained these developments are, as history shows that shocks often fade if the escalation is limited.

Investments are shifting towards safe havens: Key indicators

Markets are closely watching for any additional signs of escalating tensions, which is driving investors firmly towards safe-haven assets. This risk-averse behavior.