US Involvement in Israel-Iran Conflict Sparks Financial Market Concerns
US Involvement in Israel-Iran Conflict Sparks Financial Market Concerns
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The escalating likelihood of the United States engaging militarily in the Israel-Iran conflict has raised alarm among investors, potentially leading to significant market volatility.
This concern was highlighted by the global financial advisory firm, deVere Group, as tensions heighten in the Middle East.
According to Nigel Green, Chief Executive of deVere Group, while the markets have remained unexpectedly stable recently, oil prices have surged by approximately nine per cent since the conflict began more than a week ago. He predicts that US military intervention could cause these prices to soar even higher.
Green remarked that Markets have shown an unusual calm amid rising Middle Eastern tensions, but this calm will be shattered if the US intervenes militarily. Investors are currently bracing for rate cuts and stable energy prices, yet a major conflict escalation could compel a quick revaluation of risk across all major asset classes.
Oil price surges are poised to shift inflation expectations and dampen prospective interest rate cuts, creating a dual challenge for equities already priced optimistically. The global economy, not in a robust condition, may struggle to absorb another energy shock, Green warned. This situation underscores the necessity for investors to cautiously reevaluate their portfolios.
Investors have been gradually steering towards safer assets, evidenced by the rising US dollar compared to the Japanese yen and Swiss franc, alongside shrinking Treasury yields. However, Green predicts that this cautious strategy will intensify sharply upon any US involvement in the conflict.
He pointed out the immediate reaction equity markets will have once the US enters the fray, emphasising this shift will be sentiment-driven and not necessarily based on long-term market fundamentals. Risk-sensitive categories like high-beta stocks, tech, emerging markets, and certain currencies could be the first to feel the impact.
Green also raised concerns regarding the current market's readiness to tackle volatility and a high-risk environment, urging action to rectify this dangerous disconnect. He reiterated that any acceleration towards broader warfare might lead to a rapid and disorderly market reaction, eroding investor confidence swiftly. It is crucial for investors to implement effective risk management and strategic asset allocation to mitigate the potential shocks.
In summary, a sharp uplift in oil prices might compel central banks to reconsider or pause expected rate cuts, exerting additional stress on equities and credit. Green stressed the necessity for investors to remain proactive and vigilant to navigate the uncertain geopolitical landscape effectively.
Published:Monday, 23rd Jun 2025 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
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