Briggs said government bonds are likely to continue their moves from Friday, when short-term yields fell to levels last seen in 2022. Others look at energy bottlenecks. Dave Mazza of Roundhill Financial said he is closely watching what happens to traffic in the Strait of Hormuz, a narrow waterway that handles about a quarter of the world’s seaborne oil trade.Government bonds and gold gain on port demand as stocks tumble | The flight to quality drove gains in government bonds and precious metals
“This is about the Hormuz risk, not retaliation. If shipping remains open, supplies can work through,” he said. “If not, all bets are off.”
The rich valuations of global equities and credits also make it easier for investors to mitigate risk, says Ed Al-Hussainy, portfolio manager at Columbia Threadneedle Investments. Markets are already tense due to changing US tariff policies, disruption from artificial intelligence and tensions related to private credit.
“The extent of the derisking is anyone’s guess,” Al-Hussainy said. Saudi Arabia’s Tadawul All Share Index opened nearly 5% lower before recouping most of that decline in Sunday trading. Meanwhile, Bitcoin recovered and traded around $68,000. Put options on the cryptocurrency worth $1.87 billion were concentrated at the $60,000 level on Deribit, signaling continued demand for downside protection.
Concerns about the impending military action began to filter into markets on Friday. Brent crude closed at its highest price since July, while the S&P 500 lost 0.4% on the day, posting its biggest monthly loss since March.
Strategists at Barclays Plc warned against buying a dip anytime soon. Investors have become accustomed to geopolitical flare-ups that quickly dissipate, but this episode threatens to last longer, wrote Ajay Rajadhyaksha, the firm’s global research chairman, citing the potential for U.S. casualties, attacks on Iran’s leadership and disruption of Hormuz traffic.
“The risk-reward seems unconvincing,” he said. “If stocks pull back enough (say more than 10% in the S&P 500), there will likely be a time to buy. But not yet.”
Here’s what other investors and strategists had to say:
Kevin Gordon, head of macro research and strategy at Charles Schwab & Co. “To the extent that this sends oil prices higher on a somewhat sustained basis, there could be a near-term inflation scare that will spook the stock market. However, I think investors should continue to think about the distinction between front-page risk and bottom-line risk. If this conflict does not have meaningful downstream effects on growth or earnings, any negative reaction in the stock market has the potential to be short-lived.”
Francis Tan, chief Asia strategist at Indosuez Wealth Management
“There is a strong possibility that Asia, and further into Europe and the US, will experience a risk-off gap. The immediate impact will be on airline and travel stocks as we see news of airspace closures over the Middle East, as well as possible cancellations of flights that had to use the airspace en route to Europe.
Should the situation in the Gulf persist for a few months, oil prices could rise above $100 per barrel, dampening expectations of more Fed rate hikes in 2026. This would put a damper on growth stocks, especially technology stocks, which could see a decline.”
Gregory Faranello, head of U.S. interest rates at Amerivet Securities
“The military operation with Iran could last a few weeks. We do not believe it will last. Over the past four years, US Treasuries have been range-bound and there is room for yields if investors want a safe haven. Ultimately, yields will be driven by the Fed and the economy. This operation in Iran does not change US fundamentals.”
Frank Monkam, head of cross-asset macro strategy and trading at Buffalo Bayou Commodities
“This attack in Iran over the weekend provides a near-perfect sell-off catalyst for an already fragile stock market, and the recent uptick in volatility is likely to continue in the shorter term. That said, geopolitical flare-ups typically tend to create temporary sell-offs rather than sustained bear markets, so I expect stocks to eventually stabilize once developments in the Middle East are fully digested.
In the bigger picture, the macro question is about the potential impact of an oil shock on an economy that is showing signs of stagflation based on recent data. That is why I expect policy volatility to return to the fore in the coming weeks and months.”
Rajeev de Mello, global macro portfolio manager at Gama Asset Management SA
“A prolonged escalation of hostilities between the United States and Iran would reach emerging markets primarily through the oil complex.
The majority of major emerging economies are net importers of oil, and energy remains a significant part of both their import bills and their inflation mandate. Higher crude oil prices are widening current account deficits, depressing real incomes and forcing central banks to choose between supporting growth and limiting inflation expectations. This is particularly relevant given the strong recent performance of emerging market risk assets: positioning and sentiment have improved, leaving less room for an adverse terms of trade shock.”
Joe Gilbert, portfolio manager at Integrity Asset Management
“Energy stocks and metals will be the leaders, as will real estate and utilities – the more classic defensive groups. Defense stocks will also get a bid due to increased demand for their products. Consumer discretionary stocks will be losers due to higher oil prices, which will hurt airlines and retailers.
Madison Faller, Global Investment Strategist, and Erik Wytenus, Head of EMEA Investment Strategy, at JPMorgan Private Bank
“For investors, the ripple effects could extend across the global economy and financial system. Energy is at the heart of these risks, with the Middle East serving as a crucial hub for global oil and gas flows. Even the possibility of disruption could quickly impact production costs, consumer prices, monetary policy expectations, market sentiment and the broader outlook for growth and inflation.”
“Our constructive outlook for the year remains, but these events reinforce the reality of a fragmenting world order. Now more than ever, portfolios need to be built with resilience in mind – with both gold and exposure to sectors that governments consider strategically vital.”
Maxence Visseau, Dubai-based research director at investment firm Arkevium
“I expect rates to fall at least 5 to 10 basis points in the first step,” he said, referring to government bonds. “But the complication is oil. If crude rises to $80 to $90 on a Hormuz disruption, the long end will be caught in a tug-of-war between safe haven demand and repricing inflation expectations.
You could see the curve steepen aggressively as the market starts to price in Fed cuts and breakevens continue to widen. The Fed is already stuck at 3.5-3.75% with inflation approaching 3%. An energy shock makes their work considerably more difficult and can force an aggressive attitude.”
#Global #Markets #Wall #Street #Turns #HavenFirst #Strategies #Attacks #Iran