Global markets split into winners and losers amid Iran conflict

Three months after the start of the conflict in Iran, global financial markets are showing a sharp divergence, with some assets surging while others face losses. Oil, the US dollar, and technology stocks have emerged as key winners, while energy importers and consumer-facing sectors are under pressure.

Oil prices have risen by about 40%, significantly reshaping inflation forecasts and interest rate expectations. In physical markets, prices have climbed above $100 per barrel, at times nearly doubling pre-war levels. However, record releases from strategic reserves and efforts to secure alternative supplies have helped ease some of the pressure.

Equity markets remain broadly elevated, supported by optimism around artificial intelligence and expectations of potential peace talks. US stock indices are at record highs, as is South Korea’s Kospi. Tech companies stand out in particular, with SK Hynix surpassing a $1 trillion market capitalization for the first time amid the AI-driven rally.

Not all sectors are benefiting. Airline stocks have dropped by more than 6% due to global transport disruptions, while luxury goods indices are down around 10% on concerns over weaker consumer demand. Investors are also more cautious about the consumer outlook amid persistent inflationary pressures.

The US dollar has strengthened by about 1.5% since the start of the conflict, maintaining its role as a safe-haven asset. Meanwhile, Asian currencies have weakened due to the region’s dependence on energy imports and disruptions following restrictions on flows through the Strait of Hormuz. The Indian, Indonesian, and Philippine currencies have been hit hardest, while the Chinese yuan has remained relatively stable.

Government bond markets are also under pressure due to inflation concerns and rising defense spending. Long-term US Treasury yields have climbed to their highest levels since 2007, while German bond yields have reached 15-year highs. Investors expect major central banks, including the European Central Bank, may continue tightening monetary policy.

Tags: war