Markets do not perceive worsening risks in the Middle East

Stock markets are demonstrating significant resilience in the face of risks posed by the worsening conflict in the Middle East, according to an analysis released this Monday by consultancy BA&N.

“Global stock markets are trading slightly lower, escaping significant reactions to the escalation of the conflict in the Middle East for now, with investors confident that US involvement will weaken Iran’s ability to respond and put more pressure on the country to accept a peace agreement,” reads the note shared by BA&N analysts.

Likewise, traditional safe-haven assets are also in negative territory, “confirming that the market is not perceiving an increase in risks in the Middle East”, these analysts highlight. Thus, gold is trading in the red and the yen is losing against the dollar, while the US currency is once again trading in positive territory.

Brent rose more than 5% to surpass $80 per barrel, but calmed down after this spike in the first hours of trading, continuing to appreciate 0.5% to $77.3. It has accumulated an increase of 11% since the first attacks by Israel.

Analysts at BA&N Research Unit believe that Iran “appears isolated in the international community and weak in its response to these attacks, having so far only threatened significant retaliation.” Thus, “the possibility of a powerful response seems unlikely and investors are assessing the latest developments as having a greater likelihood of forcing Iran to accept a deal that would end instability in the region.”

The main focus is on whether Iran will opt to close the Strait of Hormuz, a major transit point for oil and other goods in the region. A prolonged closure of the waterway could send oil prices into triple digits, but analysts continue to view this scenario as unlikely, not least because it weakens Iran.