Global market sentiment was jolted on Monday following the outbreak of military conflict in Iran, leading to sharp declines in equities and a spike in oil prices. Investors flocked to safe-haven assets, boosting gold and the US dollar.

As of the latest update, Nasdaq futures were down 1.19%, S&P 500 futures fell 1.06%, and Dow Jones futures declined 1.39%.

Airlines and banking stocks led losses during Asian trading hours, a trend that continued as European markets opened. In Europe, natural gas prices surged by 50% due to threats to global supply flows. Banking and travel sectors fell by 3% or more, dragging the European Stoxx 600 index down by 1.8%. British Airways' parent company IAG SA saw its shares drop 5% amid widespread flight disruptions in the Middle East.

US stock futures fell significantly in pre-market trading, with technology stocks also facing selling pressure.

Barclays strategists cautioned against rushing to "buy the dip." Global Chair Ajay Rajadhyaksha noted that while investors have grown accustomed to geopolitical tensions cooling quickly, the current situation may persist longer due to risks such as potential US casualties, strikes on Iranian leadership, and disruptions to shipping through the Strait of Hormuz.

He stated, "The risk-reward profile does not look attractive. If equity markets correct deeply enough—for example, if the S&P 500 falls more than 10%—a buying opportunity may emerge, but we are not there yet."

Mathieu Racheter, Head of Equity Strategy at Julius Baer, commented, "The ultimate outcome remains highly uncertain, ranging from a relatively swift political de-escalation to broader regional spillover. In this 'fog of war,' markets tend to trade on probabilities rather than shifting facts."

The escalation of Middle East conflict adds another headwind to already sensitive markets. Prior concerns included potential changes in US interest rate policy, the impact of artificial intelligence, and stress in private credit markets. For traders, one of the most pressing questions is how long the conflict will last and to what extent hostilities may spread.

US President Donald Trump stated that airstrikes on Iran will continue, potentially for weeks, and demanded that Iranian leadership submit. Meanwhile, Iran's security chief indicated no intention to negotiate with the US. Separately, Saudi Aramco suspended operations at its largest refinery in Saudi Arabia following a drone attack, according to informed sources.

Andrea Gabellone, Global Head of Equities at KBC Securities, said, "It remains unclear how long the conflict will persist and, more importantly, how energy markets will react. A positive for the US is that markets have already corrected since January, so they are not in overbought territory. It can be argued that safe-haven assets should continue to outperform."

In emerging markets, a currency index for developing nations, which hit a record high last week, fell 0.7%. Emerging market equities dropped 1.6%, their largest decline in over three weeks, with some Eastern European markets down as much as 3% in early trading.

Skylar Montgomery Koning, Bloomberg Macro Strategist, noted, "There is no one-size-fits-all defensive asset that can fully insulate portfolios if the Middle East conflict becomes prolonged. However, the US dollar remains an effective hedge against surging energy prices and the resulting cost-push inflation, reflecting the US shift from a net energy importer to an exporter."

Oil prices surged rapidly. Brent crude, after briefly exceeding $82 per barrel during Asian trading, hovered near $80 as the conflict effectively halted traffic through the Strait of Hormuz—a key energy artery off Iran's coast.

The greatest market risk stems from potential attacks on critical oil and gas infrastructure in the Middle East or prolonged disruption to shipping through the Strait of Hormuz. Located at the entrance to the Persian Gulf, the strait handles about one-fifth of global crude shipments, with roughly 20 million barrels of crude and refined products passing through daily. Wood Mackenzie warned that if transit through the strait is not quickly restored, oil prices could rise to $100 per barrel.

Safe-haven demand strengthened as investors reduced risk exposure. Gold rose more than 2%, approaching $5,400 per ounce, while the US dollar posted its largest gain in nearly a month. However, US Treasury yields rose across the curve, with prices falling, partially reversing last week's gains. The 10-year Treasury yield had previously dipped below 4% on concerns that the Federal Reserve may be less inclined to cut rates if oil prices remain elevated.

A prolonged oil price surge could further complicate Treasury trading dynamics. On one hand, safe-haven demand may push yields lower; on the other, higher energy prices could fuel inflation and economic pressures, driving yields upward.

Dec Mullarkey, Managing Director at SLC Management, remarked, "This comes at a fragile time as investors are becoming more cautious. US equities are already highly sensitive to tech sector risks and credit stress, so the prospect of rising commodity prices may trigger further selling as investors reduce exposure."

The Middle East conflict boosted safe-haven demand, lifting the US dollar to a five-week high against a basket of currencies. Matthew Ryan of Ebury noted that while the conflict was unexpected, short-term spillover effects may be relatively contained since risk premiums were already partly priced in and the attacks occurred during market closures. However, "risk-off trading is likely to dominate in the near term."

Gold broke above $5,400 as safe-haven demand drove prices higher. During early European trading, New York gold futures rose 3.4% to $5,425.20 per ounce, extending gains from the previous week. Other precious metals followed suit: silver futures increased 3.2% to $96.24 per ounce, while platinum rose 2.1% to $2,422.50 per ounce.

Warren Patterson and Ewa Manthey of ING stated, "Renewed tensions, against a backdrop of already bullish investor positioning, inject new geopolitical risk premiums, further reinforcing gold's status as the preferred hedge."

Bitcoin recovered after an earlier decline. Stephen Coltman of 21Shares noted that while risk aversion typically weighs on Bitcoin, cryptocurrencies often benefit from higher inflation expectations when Middle East conflicts drive up oil prices and stoke inflation concerns.

Beyond Middle East developments, traders are also focused on the US February non-farm payrolls report due later this week.

JPMorgan Chase CEO Jamie Dimon warned that markets are falling into a "comfort illusion," drawing parallels to the period preceding the 2008 financial crisis. Speaking at the annual investor day on Monday, Dimon stated that current financial conditions bear a striking resemblance to the "false prosperity" seen in 2005, 2006, and 2007.

He remarked, "It is unsettling—we saw almost identical conditions in 2005, 2006, and 2007. When the tide rises, everyone profits, leverage is pushed to the limit, and market participants even believe 'there is no ceiling.'"

He further cautioned, "My personal observation is that markets are succumbing to a kind of 'comfort illusion'—people are starting to believe that high asset prices and surging trading volumes are 'real and sustainable,' and that risks have disappeared. This cognitive bias is precisely why we remain highly cautious."

Dimon's warning comes amid heightened global market volatility, with investors selling stocks across sectors over concerns that artificial intelligence could disrupt core business models. Within the financial industry, these structural challenges are particularly acute in the private credit market.

Former Goldman Sachs CEO Lloyd Blankfein also sounded the alarm, warning that a potential crisis is approaching and a major reckoning is inevitable. Blankfein, who steered Goldman Sachs through the 2008 crisis, cautioned that Wall Street is engaged in a new lending spree, this time exposing ordinary American savers to significant risk.

He emphasized that the US financial system is slowly approaching another potential disaster, with ordinary Americans directly exposed to loss risks. He highlighted that assets being marketed to the public are extremely difficult to value, may conceal hidden leverage, and are highly illiquid during crises. "When assets lack liquidity and are extremely opaque, we must remain vigilant. We are nearing a tipping point at the end of this credit cycle, and a major清算 is unavoidable."

Blankfein's concerns are not unfounded. The $1.8 trillion private credit market is currently experiencing turbulence. Several large asset management firms, including BlackRock, are facing losses from non-performing loans. Last week, UK-based mortgage lender Market Financial Solutions was forced into bankruptcy amid allegations of fraud and duplicate asset collateralization.

Focus Stocks: Airlines fell collectively in pre-market trading: American Airlines, Delta Air Lines, and United Airlines all dropped more than 5%. Defense stocks gained in pre-market trading: Raytheon Technologies and Lockheed Martin both rose over 8%. Gold mining stocks advanced: Newmont Mining, Gold Fields, Kinross Gold, Eagle Mining, Barrick Mining, and Pan American Silver all rose more than 3%. Memory chip stocks declined broadly: Micron Technology fell 3.6%, SanDisk dropped 4%, Western Digital declined 3.8%, and Seagate Technology slid 3%. Amazon fell over 2% in pre-market trading due to cloud service outages in Bahrain and the UAE. Tesla dropped 2.6% as February new registrations in Norway and France fell 88% and 14.7% year-over-year, respectively. Palantir rose nearly 4% following reports that the US used Anthropic technology in airstrikes on Iran. InterContinental Hotels Group fell 4.3% as UK authorities launched an investigation into data sharing practices among hotel chains. Jinko Solar rose over 2% after announcing a price increase for its modules.