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…
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A prolonged escalation in hostilities between the United States and Iran would transmit to emerging markets first and foremost through the oil complex
80% confidenceInvestors have grown accustomed to geopolitical flare-ups that fade fast, but this episode risks lasting longer
80% confidenceTraders will be adopting the strategy of 'haven first, ask questions later'
80% confidenceThe extent of the de-risking is anyone's guess
80% confidenceIn the short-term, we can expect a spike in oil price (5% to 10%), lower US rates, gold up and equities down a little (around 1%)
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% confidenceInvestors 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% 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% 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 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% 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% 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% confidenceRich valuations across global equities and credit make it easier for investors to trim risk
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% 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% 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% confidenceI'd expect yields down 5 to 10 basis points at a minimum on the initial move
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% confidenceThe curve could steepen aggressively as the market starts pricing out Fed cuts and breakevens blow wider
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% 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% 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% confidenceThe scale of the attacks and Iranian retaliation is larger than what the market expected
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% confidence