The rapidly evolving and unpredictable new round of geopolitical conflict in the Middle East is intensifying anxiety among global investors and reinforcing their strong demand for traditional safe-haven assets observed since the start of the year. These assets include decades-long classics like U.S. Treasuries, gold, and the Swiss franc. In the short term at least, financial market strategy is clearly prioritizing safety, a "safety first, questions later" approach. Capital is expected to continue flowing swiftly and substantially from risk assets like equities toward major safe-haven and defensive assets such as U.S. Treasuries, gold, and safe-haven currencies. Macro traders widely indicate that the focus of all global investors will be concentrated on the energy and broad safe-haven markets.

As trading resumed fully on Monday, traders in Asian financial markets sought refuge in safe-haven assets during early sessions. This was evidenced by spot gold rising 2% early in the Asian session, the U.S. dollar surging sharply against multiple currencies, and the yield on the 10-year U.S. Treasury note continuing its downward trend, approaching the significant 3.90% level—indicating a substantial price increase for U.S. government bonds. The Swiss franc edged higher against major currencies, while the Japanese yen showed little change.

Simultaneously, a key focus for investors was Monday's opening performance: the international crude benchmark, Brent crude futures, initially skyrocketed by 13%, and WTI crude prices surged over 10%, though gains were subsequently pared to around 7%. With the U.S. President's significant announcement that military action against Iran could last up to four weeks, and with conflict spreading to Middle Eastern economies beyond Iran and Israel—such as Lebanon launching a new round of rocket attacks on Israeli territory—the potential for prolonged, unpredictable geopolitical turmoil in the region and the resulting ripple effects from rising oil prices are giving fund managers fresh reasons to sell stocks and seek safer assets further.

The new Middle East conflict is driving increased demand for safety, strengthening U.S. Treasuries/gold/safe-haven currencies, and putting short-term pressure on stock markets due to prevailing risk aversion. The market is also weighing the possibility of quickly buying risk assets on dips during declines in stocks and cryptocurrencies. Some strategists warn against rushing to buy these assets at lower levels. Against the backdrop of the latest U.S.-Israeli military strikes and Iranian retaliation, global financial markets are currently in a phase of high risk aversion and uncertainty.

This "safety first, questions later" reaction aligns with a classic risk-off pattern: when geopolitical risks suddenly escalate and threaten global energy supply chains (approximately 20% of oil and liquefied natural gas transit the Strait of Hormuz), investors typically seek highly liquid assets with strong capital preservation qualities. Consequently, robust recent safe-haven demand could push gold higher, bond yields lower, energy stocks higher, and cyclical/high-valuation stocks lower.

Medium-term market strategy must incorporate two key factors: first, whether the conflict escalates into a prolonged regional war; and second, the feedback mechanism of oil prices and inflation expectations on macroeconomic policy. If the conflict is contained short-term, leading to falling oil prices and calmer market sentiment, buying risk assets like stocks and cryptocurrencies on dips could be a rational strategy—especially against a backdrop of a potentially less hawkish Federal Reserve and attractive valuation adjustments. Conversely, if the conflict persists and further disrupts energy supplies (for instance, if shipping through the Strait of Hormuz faces prolonged substantial obstruction), markets could remain in a risk-off state for an extended period, keeping pressure on risk assets. In such a scenario, investors should maintain safe-haven positions and manage exposures cautiously.

The primary strategy for global financial markets in the short term remains prioritizing defensive allocations, focusing on bonds, precious metals, safe-haven currencies, and defensive sectors. Provided the conflict does not significantly worsen and macroeconomic fundamentals still support growth, a gradual approach to accumulating risk assets on dips could be adopted in the medium term, particularly by seeking structural opportunities after excessive pessimism. This phased strategy reflects both the direct impact of geopolitical risk on markets and the potential for recovery based on long-term economic and valuation factors.

Amid the new Middle East crisis, Wall Street is turning to the classic "safe harbor first" strategy. Macro traders will adopt the classic tactic of 'safety first, ask questions later,' said John Briggs, Head of U.S. Rates Strategy at Natixis. He added that the joint U.S.-Israeli military action and the scale of Iran's subsequent retaliation could exceed market expectations. Briggs further noted that he expects the upward trend in U.S. Treasury prices from Friday to continue—driven by safe-haven demand amid a pessimistic market narrative since February about 'AI disruption'—with short-term U.S. Treasury yields falling to their lowest levels since 2022.

Disruptions to energy transport and trends in the international crude benchmark, Brent futures, are other focal points for Wall Street strategists. Dave Mazza, a senior strategist at Roundhill Financial, stated he is closely monitoring the actual shipping situation in the Strait of Hormuz, a narrow channel that carries about a quarter of the world's seaborne oil and LNG trade. Current market dynamics show that, while Iranian authorities have not officially announced a blockade of the strait, tanker monitoring indicates no tanker tracks in the Strait of Hormuz, with many tankers or large LNG carriers stalled nearby or choosing significant detours.

Reports indicate at least 150 tankers (including those carrying crude and petroleum products) are anchored in the broad waters of the Middle East Gulf crossing the Strait of Hormuz. Asian buyers, who source about a quarter of their LNG imports from Qatar, the world's second-largest exporter, have been calling suppliers to inquire about alternative large vessels, according to traders. Meanwhile, Egypt is trying to secure ships early as its supplier Israel has shut most gas fields. LNG cargoes destined for Asia and Europe have long been required to pass through the Strait of Hormuz. Ship-tracking data shows at least 11 LNG carriers traveling to and from Qatar have paused voyages to avoid the waterway. Smaller exporter the UAE also ships LNG through the strait.

As illustrated, U.S. Treasuries and gold have recently rallied strongly due to safe-haven demand, while U.S. equities have declined noticeably; capital flows into safe assets are pushing government bonds and precious metals higher. "This is about macro risk at the Hormuz level, not retaliation. If shipping remains clear, equities can digest this," emphasized Dave Mazza from Roundhill Financial. "If not, all risk bets are off."

The generally high valuations in global equity and credit markets also make it easier for investors to reduce exposure to risk assets, said Ed Al-Hussainy, a portfolio manager at Columbia Threadneedle Investments. "Risk markets like stocks and cryptocurrencies have been on edge this year due to frequent changes in U.S. tariff policy, the potentially disruptive negative impact of AI 'upending everything,' and selling pressure related to private credit," he noted. "The exact extent of de-risking is something no one can accurately predict," Al-Hussainy added.

Saudi Arabia's Tadawul All Share Index opened nearly 5% lower but erased most of the losses during subsequent Sunday trading. Meanwhile, Bitcoin, often seen as a barometer for risk appetite, fell sharply immediately after the U.S.-Israel-Iran conflict erupted but soon recovered and was trading around $68,000. However, a high concentration of $60,000 Bitcoin put options on the Deribit platform, valued at approximately $1.87 billion, shows ongoing investor demand for downside protection.

Anxiety about the fully unfolding U.S.-Israel joint military action began seeping into markets last Friday. Brent crude settled at its highest price since July 2025, while the U.S. stock market benchmark, the S&P 500 index, fell 0.4% that day, ending its largest monthly decline since March. Barclays strategists warned investors against hastily buying any risk assets entering a correction, such as high-valuation tech stocks. Investors have often grown accustomed to quickly fading geopolitical conflicts, but this new Middle East event could persist longer.

Considering potential U.S. military casualties, continued strikes on Iranian leadership, and disruptions to Hormuz traffic, this geopolitical conflict might last longer than previous ones, noted Ajay Rajadhyaksha, Global Chair of Research at Barclays, in a report. "The potential risk-reward for risk assets like equities seems unattractive," he emphasized. "If the equity market corrects more than 10% (for example, the S&P 500), there might be a modest buying opportunity. But at least for now, it's not."

Here is a summary of the latest views from major Wall Street institutional investors and senior strategists on financial markets: Kevin Gordon, Head of Macro Research and Strategy at Charles Schwab & Co., said, "If this conflict leads to a sustained rise in oil prices to some degree, it could trigger short-term inflation fears, subsequently spooking equity markets. I do think investors need to continue distinguishing between frontline risks and baseline risks. If this conflict has no substantive downside impact on growth or earnings, then any negative reaction in equities is likely short-lived, and buying on dips would still be effective." Vincent Mortier, Chief Investment Officer at Amundi, stated, "Short-term, while awaiting clearer event impact, we can anticipate oil prices rising 5% to 10%, U.S. Treasury yields falling (meaning bond prices rise), gold gaining short-term, and equities dipping slightly (around 1%). This also serves as a real excuse for the market to take some reasonable profits near all-time highs." Brendan McKenna, Emerging Markets Strategist at Wells Fargo, emphasized, "This shock will lead to short-term weakness in emerging markets. Iran's response is more forceful or hawkish than anything we've seen before, the Strait of Hormuz is essentially closed, and U.S.-Israeli military cooperation has become more aggressive toward Iran. This shock, combined with generally high valuations and overdone thematic holdings in emerging markets currently, should drive selling of risk assets in the initial conflict phase." Gregory Faranello, Head of U.S. Rates at Amerivet Securities, said, "U.S.-Iran military action could last several weeks. We don't think it will drag on very long. Over the past four years, U.S. Treasury yields have ranged; if investors urgently need safety, yields still have significant room to fall. Ultimately, yields will be driven by the Fed and the economy. We don't believe this Iranian retaliation changes U.S. fundamentals." Frank Monkam, Head of Cross-Asset Macro Strategy and Trading at Buffalo Bay Commodities, noted, "The Iranian attacks over the weekend were almost a perfect catalyst for stock selling; recent volatility increase could continue strongly in the near term. However, geopolitical conflicts typically trigger temporary risk-asset sell-offs, not sustained bear markets, so I expect equities to restabilize once the Middle East situation is fully digested by the market." Rajeev de Mello, Global Macro Portfolio Manager at Gama Asset Management SA, stated, "A prolonged escalation of hostility between the U.S. and Iran would first transmit to emerging markets through the oil market. The vast majority of large emerging market economies are net oil importers, with energy constituting a significant portion of their import bills and inflation baskets. Higher crude prices would widen current account deficits, squeeze real incomes, and force emerging market central banks into difficult choices between supporting growth and containing inflation expectations." Joe Gilbert, Portfolio Manager at Integrity Asset Management, said, "Energy and metals stocks will be leaders among risk assets; real estate and utilities are also classic defensive sectors. As demand for large defense products like military equipment may significantly increase due to renewed geopolitical tensions, global defense stocks will also attract keen investor interest. Conversely, non-essential consumer stocks will likely be losers, as higher oil prices will hurt customer demand for airlines and retailers." Barry Visseau, Head of Research at Acquin Investments (based in Dubai), stated, "I expect U.S. Treasuries to fall at least 5 to 10 basis points in initial volatility. But the complexity lies with international oil prices. If crude prices rise to $80-$90 due to Hormuz conflict, long-term U.S. Treasury yields will be caught between safe-haven demand and inflation expectation repricing. You might see the Treasury yield curve steepen sharply as the market prices in the possibility that the Fed may not continue cutting rates due to oil-driven long-term inflation, potentially pushing up breakeven rates. The Fed is already stuck with a benchmark rate around 3.5%-3.75% while inflation is near 3%—an energy shock makes their job harder and might force a more hawkish monetary policy stance under new Fed Chair Wash." Stephan Kemper, Chief Investment Strategist at BNP Paribas Wealth Management, said, "I expect a significant equity market drop as this will dampen sentiment. The main downside risk comes from international oil prices. If oil prices remain persistently high, it could impact global growth prospects and inflation data, ultimately making the Fed's rate-cut path more difficult. This could disrupt the recent strong rebound in cyclical stocks in global markets. If the oil price-related impact is very limited, I would be more inclined to view any deeper correction as a rare long-term buying opportunity." Madison Faller, Global Investment Strategist at J.P. Morgan Private Bank, and Erik Wytenus, Head of EMEA Investment Strategy, stated, "For investors, the ripple effects of these shocks could quickly spread across the global economy and financial system. Energy is at the core of all these risks; the Middle East is the most critical hub for global oil and gas flows. Even potential disruptions can rapidly affect production costs, consumer prices, monetary policy expectations, market sentiment, and broader economic growth and inflation prospects. We maintain a constructive outlook on risk assets for the year, but these events highlight the reality of fragmenting global growth秩序. Now, more than ever, it is essential to build resilient portfolios—including exposure to both gold and manufacturing sectors deemed strategically important by governments, such as advanced process chip manufacturing covering AI and memory chips, packaging and testing, semiconductor equipment, and related defense industrial chains."