Middle East war risk was the most underpriced asset — Until today
|The Middle East powder keg just blew the lid off global markets. Israel has reportedly launched airstrikes deep into Iranian territory, marking the most aggressive escalation yet in a regional shadow war that’s been simmering for years. This time, the flames are no longer metaphorical.
Equity futures are plummeting. Bond yields are sinking. Gold and oil are skyrocketing. Brent crude futures are racing toward the mid-$70s range—but if the Strait of Hormuz, which accounts for 20% of global oil flows, finds itself in the blast radius, you can add another $15 to the bid. Tonight, it just might.
Al Arabiya and Axios both confirm Israeli air force activity inside Iran, with Axios explicitly stating that Israel struck "its biggest and best-armed adversary" without a green light from the U.S. Sirens are blaring across Israel. Defence Minister Katz has declared a state of emergency and warned of an imminent retaliation. Israel is locking down—schools, public gatherings, even businesses—except essential infrastructure.
Meanwhile, the U.S. is trying to stay at arm’s length. Axios reports Washington gave allies a quiet heads-up but made clear it would not participate in the strikes. Trump echoed that earlier in the day, saying the U.S. would not support a direct attack on Iran’s nuclear infrastructure. But everyone on the desk knows how this works: once missiles fly and drones strike, political red lines evaporate fast.
Risk assets are recalibrating in real time. Futures are dumping. The S&P is down sharply after-hours. Treasuries are rallying hard as capital floods toward safety. Gold is reminding everyone why it still sits at the heart of every central bank’s balance sheet. It surged through the $3400 key resistance like a hot knife through butter.
Oil? The Bears just got steamrolled. The record-short positioning is getting torched, and the repricing of geopolitical risk premia is only just beginning. With energy infrastructure, supply chains, and inflation dynamics all suddenly back in the spotlight, every macroeconomic model is now outdated.
The only question now: Is this real, or just another round of symbolic sparring? If Iran holds back, we get a relief bounce. But if missiles start raining down on Tel Aviv or Tehran retaliates with real teeth, we're staring down a scenario that could redefine the macro narrative for the rest of 2025.
And if Iran’s nuclear facilities become rubble before the week’s out, this isn’t a tail risk anymore—it’s a live wire scenario with global implications.
The war premium is back. And this time, it might not be coming off anytime soon.
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