Wall Street Turns to ‘Haven-First’ Strategy Amid Iran Crisis
View original at finance.yahoo.comWall Street Turns to ‘Haven-First’ Strategy Amid Iran Crisis Photographer: Matt Jelonek/Bloomberg (Bloomberg) -- The fast‑moving conflict across the Middle East is heightening investor anxiety and strengthening the case for safe‑haven trades such as Treasuries, gold and the Swiss franc…
What we drew from this source
The claims Via News extracted from this document. We point to the source; we don't replace it.
Investors need to continue to think about the distinction between front-page risk and bottom-line risk. If this conflict has no meaningful downstream impacts on growth or earnings, any negative stock market response has the potential to be short-lived
80% confidenceThere is a high probability that Asia, and onward to Europe and the US will experience a risk-off gap down
80% confidenceGeopolitical flare-ups typically tend to create temporary selloffs rather than sustained bear markets, so I expect equities to eventually stabilize once Middle East developments are fully digested
80% confidenceHigher crude oil prices widen current account deficits, compress real incomes, and force central banks to choose between supporting growth and containing inflation expectations
80% confidenceThis Iran strike constitutes an almost perfect selloff catalyst for an already fragile equity market, and the recent uptick in volatility is likely to extend in the shorter term
80% confidenceI'd expect yields down 5 to 10 basis points at a minimum on the initial move
80% confidenceIf Middle East conflict sends oil prices higher on a sustained basis, there could be a near-term inflationary scare that spooks the equity market
80% confidenceThe curve could steepen aggressively as the market starts pricing out Fed cuts and breakevens blow wider
80% confidenceThis is about Hormuz risk, not retaliation. If shipping stays open, stocks can work through it. If it doesn't, all bets are off
80% confidenceThe scale of the attacks and Iranian retaliation is larger than what the market expected
80% confidenceThe risk-reward doesn't seem compelling. If equities pull back enough (say over 10% in the S&P 500), there is likely to come a time to buy. But not yet
80% confidenceThe ripple effects could reach across the global economy and financial system. Energy is central to these risks, with the Middle East serving as a critical hub for global oil and gas flows
80% confidenceA prolonged escalation in hostilities between the United States and Iran would transmit to emerging markets first and foremost through the oil complex
80% confidenceThe extent of the de-risking is anyone's guess
80% confidenceOur constructive outlook for the year stands, but these events reinforce the reality of a fragmenting global order. Portfolios should be built for resilience—with both gold and exposure to sectors governments consider strategically vital
80% confidenceConsumer discretionary stocks will be losers because of higher oil prices, which will hurt airlines and retailers
80% confidenceShould oil prices remain elevated for a sustained period, it might impact growth prospects and inflation numbers, eventually making it harder for the Fed to cut rates
80% confidenceTreasuries are likely to extend moves from Friday when short-term yields sank to levels last seen in 2022
80% confidenceThe Fed is already stuck at 3.5-3.75% with inflation near 3% — an energy shock makes their job significantly harder and could force a hawkish tilt
80% confidenceShould the situation in the Gulf be sustained over a few months, oil price could be priced above $100 a barrel and this will reduce any expectations of more Fed rate hikes in 2026
80% confidenceIf crude spikes toward $80 to $90 on any Hormuz disruption, the long-end gets caught in a tug of war between safe-haven demand and repricing of inflation expectations
80% confidenceEven the possibility of disruption can quickly affect production costs, consumer prices, monetary policy expectations, market sentiment, and the broader outlook for growth and inflation
80% confidenceEnergy stocks and metals will be the leaders as well as real estate and utilities — the more classic defensive groups. Defense stocks will get a bid as well
80% confidenceThis operation in Iran does not change US fundamentals
80% confidenceI expect equity markets to trade substantially lower as this should dampen the sentiment. The main downside risk is coming from oil
80% confidenceIf the impact on oil remains limited, I would rather see any bigger dip as a long term buying opportunity
80% confidenceThe military operation with Iran could last for a few weeks. We don't believe it drags on
80% confidenceThe macro question is around the potential impact of an oil shock on an economy that's flashing signs of stagflation-lite based on recent readings
80% confidenceIn the context of the past four years, US Treasuries have been range bound and there is room below for yields, if investors want safe haven
80% confidenceInvestors have grown accustomed to geopolitical flare-ups that fade fast, but this episode risks lasting longer
80% confidence