Markets pricing in a short war as conflict appears to escalate
Investing.com -- Yardeni Research told investors in a note on Monday that financial markets are displaying a degree of calm despite an escalating conflict in the Middle East, suggesting investors are betting on a short war even as conditions deteriorate.
“The energy and financial markets are taking the war in the Middle East remarkably well, all things considered,” the firm wrote, noting that investors “seem to believe that the war will be short-lived.”
President Donald Trump has offered no firm timeline, telling an interviewer he would know the war was over when he “feels it in his bones,” a stance Yardeni Research noted has added to volatility.
Yet key indicators remain contained. The firm highlighted elevated oil prices, still below the 2022 peak, while the S&P 500 is down just 5% from its January record and gold “marking time around $5,000.”
Despite this resilience, Yardeni Research warned that “the war seems to be escalating.” Iran has launched repeated drone and missile attacks, laid naval mines, and asserted that it has “full and intelligent control” of the Strait of Hormuz, Yardeni wrote.
The United States has responded with large-scale strikes, including what Trump called “one of the most powerful bombing raids in the history of the Middle East.”
The firm said markets may be reassured by signs that the effective blockade is “not as dire a development as widely feared,” with oil “leaking” into global supply through bypass pipelines, emergency reserve releases, and selective safe-passage arrangements with China and India.
“Given the above, the blockade of the Strait might not be as dire a development as widely feared, including by us. We certainly hope that’s the case. If so, it might explain why the energy and financial markets haven’t panicked, so far,” the firm concluded.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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