Global financial markets are entering the sixth week of the US-Iranian conflict in an unprecedented climate of pessimism. Richard Harris, CEO of Port Shelter Investment Management, told CNBC on Monday that recovery patterns observed in previous crises—the 1991 Gulf War, the 2003 invasion of Iraq, the 2020 Iranian tensions—no longer apply to the current situation. “Markets have crossed a point of no return,” he stated, citing a structural slowdown in growth and a lasting retreat of consumers.
The figures support the pessimists. The S&P 500 has lost 14% since February 28, the date hostilities began. The Nasdaq is down 18%, weighed down by technology stocks particularly sensitive to growth prospects. In Europe, the Euro Stoxx 50 is down 11% and the French CAC 40 is down 13%. Asian markets are not spared: the Japanese Nikkei and the Hong Kong Hang Seng show respective drops of 15% and 17%. In total, global market capitalization has melted by more than $8 trillion in five weeks.
Oil is at the epicenter of the crisis. Brent crude has surpassed $115 a barrel, a level not seen since 2022, and Trump's threats could push it beyond $120. The closure of the Strait of Hormuz—through which 17 million barrels per day transit—has caused a supply shock that US, European, and Chinese strategic reserves only partially offset. The International Energy Agency (IEA) has recommended its members release 2 million barrels per day from their strategic stocks, an exceptional measure not triggered at this scale since the Gulf War.
The US Federal Reserve finds itself in an impossible position. Inflation, which has picked up again due to the surge in oil prices, would in principle call for an increase in benchmark interest rates. However, the economic slowdown caused by the conflict and geopolitical uncertainty call, on the contrary, for monetary easing. Markets now anticipate a prolonged status quo from the Fed, depriving investors of their last safety net. US Treasury bonds, traditionally considered a safe haven, are seeing their yields fluctuate erratically, a sign of a generalized loss of bearings.
For individual investors, analysts recommend extreme caution. Gold funds and agricultural commodities have outperformed since the start of the conflict, while cryptocurrencies—once presented as an alternative refuge—are also suffering from the bearish contagion, with Bitcoin losing 22% in a month. Wealth managers advise reducing equity exposure, favoring short-term bonds, and diversifying geographically towards markets least exposed to Middle Eastern risk, particularly Latin America and Southeast Asia.
