Even if the Iran war simmers down this fall, the Ukraine war looks primed to shake up markets once again.

A durable cease-fire appears out of reach in Iran, but a major negative surprise in the war would be required for it to spike oil prices and kill America's bull market. That isn't likely: President Donald Trump needs a strong economy and Iran needs regime survival. Brent crude should stay between $80 to $110 a barrel.

The outlook for the Ukraine war is an entirely different story. The war is escalating and likely to cause a serious disruption in markets in the near term. Fortunately, however, it will have less of an impact on the global economy than the Strait of Hormuz.

Ukraine has started striking deep into the Russian heartland with long-range missiles and drones. This week, Ukraine struck one of Russia's largest oil refineries and expanded its attacks on major e-commerce warehouses. Some estimate Ukraine has disrupted as much as a third of Russia's energy refining capacity, undermining its domestic social stability via fuel shortages.

Such economic attacks have opened a "Pandora's box," Russian President Vladimir Putin recently said.

Moscow is escalating its drone warfare, attacking Ukraine's ports, and attempting to sabotage Europe's critical infrastructure. Fear of spillover into the rest of the continent is so serious that the director of the U.S. Central Intelligence Agency flew to Moscow this week to discuss with Russian secret services, albeit not with Putin himself.

Far more likely than outright Russia-NATO war is a scenario in which Moscow stages a military event large enough to raise fears of a major war in Europe, yet small enough for Trump to hesitate before getting involved. Hesitation would sow deeper doubts across the West about U.S. reliability, NATO solidarity, and the wisdom of supporting Ukraine's offensive against Russia.

Eventually, the U.S. will swing behind its allies. But reputational and psychological damage would be done. A rift between the U.S. and NATO would mark an important symbolic victory for Russia. Ironically, it would probably be big enough to give Moscow the domestic political cover it needs to negotiate a cease-fire with Ukraine.

But financial markets would go for a whirl in the meantime. A temporary pricing of a higher Russia-NATO war risk would push up long-dated bond yields across the West. And yields are already edging up over economic and policy uncertainty as well as fiscal imbalances.

Considering that Russia-NATO tensions will likely get much worse before they get better, investors would be wise to buy the dip in gold, stay overweight U.S. equities relative to global equities, and favor developed European assets over emerging European peers.

More broadly, the "sell America" trade will falter until the resolution of the wars in Ukraine, Iran, or both. A more lasting outperformance of international assets may only emerge after global stability is reinforced, namely after a Russian provocation that triggers a NATO response, assuming Moscow doesn't go so far as to seize NATO territory or cause mass casualties.

Putin would be insane to initiate a two-front war that involves the world's greatest industrial and military power. Investors should bet against that. But they should prepare themselves to ride out the volatility this fall, as the Ukraine war escalates and prompts a major round of brinkmanship between Putin and the West.

Guest commentaries like this one are written by authors outside the Barron's newsroom. They reflect the perspective and opinions of the authors. Submit feedback and commentary pitches to ideas@barrons.com.

Matt Gertken, PhD is head of GeoMacro at BCA Research. He is the author of Swift's Grand Strategy.