Iran’s attack on Israel has rekindled the allure of safe havens and oil has surged, but with no clarity yet on how the Middle East might evolve, investors are treading tentatively.Mohit Kumar, a strategist at U.S. investment bank Jefferies called the market reaction so far “guarded” as investors await Israel’s response.
“Geopolitics is impossible to trade and hence keeping a low risk profile would be a prudent strategy,” Kumar said. This time, investors’ decisions may rest on Israel’s response and whether the conflict with Iran escalates. A previous round of Iranian missiles fired at Israel in April - the first ever - were shot down with the help of the U.S. military and other allies. Israel responded at the time with airstrikes in Iran, but wider escalation was averted.
One specific concern for investors is oil prices, which jumped on Tuesday. Investors worry that the fears of supply disruptions from the Gulf will push crude prices sharply higher, as happened in prior periods of intense strain or conflict.