Wall Street is hitting the panic button. Investors are dumping risky assets and rushing into safe havens. They want protection from the escalating war between the US, Israel, and Iran.
Traders have adopted a new strategy. They call it “haven first, ask questions later.” John Briggs at Natixis said the scale of the attacks and Iranian retaliation is larger than markets expected.
Money is flooding into Treasuries, gold, and the Swiss franc. Short-term Treasury yields plunged to levels last seen in 2022 on Friday. Gold demand is surging as investors seek shelter.
All eyes are now on the Strait of Hormuz. This narrow waterway handles about a quarter of the world’s seaborne oil trade. Dave Mazza at Roundhill Financial said if shipping stays open, stocks can survive. If the strait closes, all bets are off.
Early damage is already showing. Saudi Arabia’s stock exchange opened nearly 5% lower on Sunday. Bitcoin is struggling around $68,000 with heavy bets placed on it crashing to $60,000.
Experts warn against buying the dip. Strategists at Barclays said this conflict could last longer than typical geopolitical flare-ups. Oil prices could spike above $100 per barrel if the war continues.
Higher oil prices threaten to bring back inflation. The Federal Reserve might be forced to keep rates higher for longer. Emerging markets will suffer first from the shock of expensive energy.
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