Investors run to safe-haven assets amid Middle East escalation

The US stock market concluded Thursday’s session in the red as the escalating Middle East conflict pushed WTI oil prices above $80 per barrel. By the end of the day, the Dow Jones (US30) fell by 1.61%. The S&P 500 (US500) shed 0.56%, and the tech-heavy Nasdaq (US100) closed down 0.29%. Fearing stagflation and new logistical disruptions in the Strait of Hormuz, investors actively offloaded industrial sector holdings. Simultaneously, the financial sector faced massive sell-offs; banking giants Goldman Sachs and Morgan Stanley lost between 3% and 3.7% in value amid volatile bond yields. The current dynamics reflect growing market pessimism regarding global economic growth prospects during a prolonged confrontation. The combination of inflationary pressure and the threat of energy shortages is forcing traders to reassess their portfolios.

European markets demonstrated a broad decline on Thursday. The German DAX (DE40) dropped 1.61%, the French CAC 40 (FR40) closed down 1.49%, the Spanish IBEX 35 (ES35) lost 1.38%, and the British FTSE 100 (UK100) finished down 1.45%. Ongoing strikes between Iran and Israel on infrastructure targets in the Persian Gulf are provoking an uncontrolled surge in resource prices. The spike in natural gas prices was particularly painful for European equities, pushing bond yields higher and triggering a new wave of sell-offs in the banking sector, where shares of giants like Santander and Deutsche Bank fell nearly 3%. Investors seriously fear that a protracted conflict and energy shock will lead to industrial stagnation in Europe, forcing them to rotate capital from cyclical stocks into defensive instruments.

Benchmark oil prices made a powerful leap, gaining over 8% and consolidating above $80 per barrel – a level not seen since the summer of 2024. The rally was driven by a critical breakdown in global supply chains following the near-total halt of tanker traffic through the Strait of Hormuz after an Iranian missile attack on a commercial vessel. The situation was further exacerbated by Beijing’s decision to ban its largest refineries from exporting diesel and gasoline, intensifying the fuel product deficit and neutralizing international efforts to calm investors via insurance measures and military escorts. Despite the panic, a counterweight emerged from fresh US Energy Information Administration (EIA) data, which recorded an unexpected 3.5-million-barrel increase in commercial crude inventories. Total reserves of 439.3 million barrels provide a safety cushion capable of partially absorbing supply shocks in a prolonged conflict.

The US natural gas prices (XNG) corrected to $2.98 per MMBtu, partially offsetting previous gains after Washington announced upcoming measures to stabilize the energy market. Despite this local pullback, quotes maintain a positive weekly trend of approximately 4%, reacting to the unprecedented operational halt at Qatar’s Ras Laffan hub and the blockade of the Strait of Hormuz. Investors are deeply concerned about a global LNG shortage, as the force majeure in Qatar, one of the world’s largest exporters, creates systemic risks for supplies to Europe and Asia.

Asian markets traded lower yesterday, though with mixed results. The Japanese Nikkei 225 (JP225) rose by 1.90% during the session, while the FTSE China A50 (CHA50) declined 0.65%. The Hang Seng (HK50) edged up 0.28%, and the Australian ASX 200 (AU200) posted a positive result of 0.44%.

The New Zealand dollar (NZD) recovered to $0.590, yet it is ending the week in the red due to the flight to safe-haven assets. As an economy heavily dependent on energy imports, New Zealand has proven highly vulnerable to fuel price spikes, increasing pressure on the “kiwi.” Domestically, a serious dissonance is emerging between market expectations and official rhetoric; traders now price in an 80% probability of an RBNZ rate hike in September, expecting a total tightening of 40 basis points by year-end.