Analysts point out that this geopolitical crisis comes just as the global stock market has experienced a strong rebound with little adjustment, putting it in a relatively fragile position. Currently, risk assets are retreating, while the yen and U.S. Treasuries are favored.Safe haven AssetsIf Tehran's response is limited and energy flows are not disturbed, experience indicates that premiums may dissipate quickly. However, any signs of retaliation or supply disruption will keep volatility high and push up Crude Oil Product.Safe haven Assets。
On Friday, Israel launched airstrikes on Iran, causing the market to immediately fall into panic mode—oil prices soared, Gold rose, while Asian stock markets and U.S. stock futures fell in response.
CCTV News previously reported that the air force is conducting airstrikes on dozens of targets in Iran related to its nuclear program and other military facilities, naming the operation "Lion's Power." The Israeli military stated that Iran has enough enriched uranium to produce multiple bombs within days, necessitating action to address this "imminent threat." The Israeli Prime Minister indicated that military actions against Iran's nuclear facilities would continue for several days until the threat is eliminated.
This geopolitical crisis comes at a time when global stock markets are at a high, and Wall Street strategists are closely monitoring a key question: How severe will Tehran's retaliation be?
Market vulnerability is increasing, and the scale of Iran's counterattack is a key variable.
Michael O'Rourke, Chief Market Strategist at JonesTrading, warns that this time the market faces greater risks compared to similar events last year.
"I am doing my best to assess the situation, which is clearly still changing - but the risks facing the market should be greater than last year's attacks."
"The market has experienced a strong rebound with little adjustment, putting it in a more vulnerable position. This is an escalation of the situation, and the question is: How will Iran respond? Will they retaliate more forcefully? This is the unresolved question in my mind. During this rebound, the market has been relatively complacent, which is a key risk for our current position."
"It is very likely that retaliatory events will occur over the weekend, which will keep people cautious and somewhat hesitant."
Global X ETFs Sydney Investment Strategist Billy Leung pointed out: "This marks a stark reversal from the bullish sentiment last night, when optimism in Technology, moderate inflation, and light positions led the market to favor risk - while Israel's direct strikes against Iran abruptly cut this narrative."
Leung compared the current situation to past Middle East crises, stating: "Similar to the Soleimani strike in 2020 and the tanker attacks in 2019, we are seeing the same initial reaction: Crude Oil rises, and U.S. Bonds and Swiss Franc strengthen. The key question is whether this restraint can be maintained - history shows that if escalation is limited, the market often digests the shock."
Matthew Haupt, Portfolio Manager at Wilson Asset Management Sydney, also stated: "We are seeing classic risk-averse trends, with Bonds and Gold in demand, while Crude Oil surges. Typically, these trends will pull back after the initial shock. What we are focusing on now is the speed and scale of Tehran's response, which will determine the duration of the current trend."
Wei Liang Chang, Macro Strategist at DBS Group Singapore, believes that as Middle Eastern geopolitical risks resurface, safe-haven assets like the Yen and U.S. Bonds will continue to be sought after. "The market will assess the impact of this strike and focus on escalation risks. Risk assets may pull back, while safe-haven assets like the Yen and U.S. Bonds could be favored."
Charu Chanana, Chief Investment Strategist at Saxo Markets Singapore, stated: "The news of Israel's airstrikes within Iran has reignited the geopolitical risk premium. Whether this risk-averse tone will persist now depends on the next 24-48 hours. If Tehran's response is limited and energy flows remain uninterrupted, experience suggests that the premium could dissipate quickly. However, any signs of retaliation or supply disruptions would keep volatility high and push up Crude Oil and safe-haven assets."
The safe-haven properties of the US Dollar are being questioned.
It is noteworthy that some Analysts have begun to question the traditional safe-haven status of the US Dollar. National Australia Bank Limited Sponsored ADR strategist Rodrigo Catril in Sydney pointed out: "A theme worth watching is whether the safe-haven properties of the US Dollar are being diluted by the trade policies (tariffs), fiscal extravagance, and challenges to the rule of law posed by the US government. The evidence so far certainly suggests so."
Catril further analyzed: "If confirmed, Israel's unilateral actions also highlight that the world order may be changing. The US seems to be retreating from its dominant geopolitical role, opening the door for other countries to pursue their agendas. Geopolitics is becoming a more disruptive force in the market, adding another layer of uncertainty. Safe-haven assets may be in demand, but the US Dollar may not be."
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