The ongoing U.S.-Iran war has unsettled markets this week. Over the past 5 days, the Dow Jones Industrial Average (DJIA) fell 2.64%, and the S&P 500 eased 0.38%. However, the NASDAQ Composite climbed 0.59% during the period.
The EURO STOXX 50 also declined 5.98%, Nikkei 225 fell 4.06%, while South Korea’s KOSPI plunged 9.88%, during the same period.
Investors are coming to terms with the possibility that the conflict could last longer than initially expected. This realization has led to a shift in the market, with traders pricing in more hawkish rate expectations from major central banks. There are also fears of a potential inflation resurgence should the energy price spike continue.
“What we see is … markets (consolidating) for a time, chopping around current levels, as a ‘wait and see’ approach takes (precedence) for the time being,” Michael Brown, senior research strategist at Pepperstone told Reuters.
Brown’s comments come as the U.S-Iran war entered its seventh day and pushed oil prices to $89 on Friday, the highest level since April 2024. Investors worry about the prolonged closure of the Strait of Hormuz, which carries about 20% of global crude.
Experts Predict Short-Term Market Impact
According to Tom Lee of Fundstrat, the market volatility related to the Iran conflict is seen as a “risk premium” rather than a structural breakdown. Lee expects markets to rebound into late March and potentially strengthen through April.
Earlier, Lee had expressed optimism about a turnaround in March, despite February’s uncertainty around the AI trade. He suggested that the market’s pessimism against AI in February was “overly pessimistic”.
Meanwhile, Edward Yardeni, President of Yardeni Research, predicted a “short war scenario”, expecting the conflict to wind up in a few weeks. He urged investors to seek opportunities in equities, despite the ongoing conflict.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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