Following the airstrike launched by Israel inside Iranian territory, which the Israeli defense minister described as a 'preemptive strike', global markets face a critical challenge: Will they succeed in containing the repercussions of this sudden geopolitical escalation?
These tensions immediately cast a shadow over market indicators, as oil prices rose, Asian stocks and U.S. stock futures saw declines, and the dollar regained its previous losses as investors increasingly leaned towards abandoning high-risk assets.
The coming hours will determine the fate of the market: Scenarios for the Iranian response
Analysts see the next few days as pivotal in determining the direction of the markets. News headlines regarding the Israeli strike have reignited geopolitical fears, and the continuation of this cautious mood depends on the nature of Tehran's response in the next 24 to 48 hours.
Scenario One: Limited Containment
If the Iranian response is limited and energy flows continue uninterrupted, historical experience suggests that the risk wave may fade quickly. In such cases, markets tend to absorb initial shocks and return to their fundamental path.
Scenario Two: Escalation and Volatility.
Conversely, any indication of a significant retaliatory response from Iran, or disruptions in oil and gas supplies, will keep volatility levels high. This scenario will push oil prices and safe assets like gold and U.S. Treasury bonds further up, with a noticeable decline in high-risk assets like stocks and cryptocurrencies.
A sudden shift in market mood: from optimism to caution
The Israeli strike represented a sharp shift in market mood, which had been optimistic the night before the attack. Optimism about the technology sector and falling inflation was driving the market towards risk, but the direct strike on Iran flipped this narrative upside down.
This scenario recalls previous flashpoints such as the assassination of Qassem Soleimani in 2020 and the tanker attacks in 2019, where markets reacted similarly with initial spikes in oil prices and strength in U.S. Treasury bonds and the Swiss franc.
The key now lies in how well these developments are contained, as history shows that shocks often dissipate if the escalation is limited.
Investments are shifting towards safe havens: Key indicators
Markets are closely monitoring for any additional signs of escalating tensions, which is driving investors diligently towards safe-haven assets. This risk-averse behavior means:
The Japanese yen and U.S. Treasury bonds: Expected to continue attracting buying flows.
High-risk assets: May see a noticeable decline as investors shy away from them.
Gold: It is a key indicator for hedging against geopolitical risks and potential inflation, and it will continue to attract interest.
Oil: Its movements remain directly linked to supply expectations from the region, and any threat to the strait will lead to further increases.