Markets Steady Amid Israel-Iran Conflict, but Strategists Warn of Complacency

Despite continued fighting between Israel and Iran, global stock markets maintained an upward trajectory on Monday, prompting warnings from analysts that investors may be underestimating the long-term risks of escalation.

The conflict, now in its fourth day, has left hundreds dead and prompted retaliatory strikes on military and energy sites in Iran, including a key oil depot in Tehran. Yet markets, from Wall Street to the Tel Aviv 35 index, posted modest gains, with energy prices showing the most volatility.

“This conflict will last longer than the Israeli lightning-strikes the market is used to,” said David Roche, strategist at Quantum Strategy. “The market may mistake any lull as a lasting peace.”

Oil Moves, Equities Hold

• Brent crude: $73.75/barrel

• Tel Aviv 35 Index: +1% on Monday

• S&P 500 Futures: Trading higher despite regional unrest

Friday saw the largest single-day gain in oil since the 2022 Russia-Ukraine conflict. While prices remain below those crisis-era peaks, analysts warn the Strait of Hormuz, a vital global oil transit route, remains vulnerable to disruption.

Strategists Urge Caution

Experts from Verisk Maplecroft, Deutsche Bank, and BNP Paribas Fortis agree that geopolitical risks are not fully priced into current market valuations.

“What we have now is very different,” said Torbjorn Soltvedt, principal Middle East analyst at Verisk Maplecroft. “It’s effectively a war, an open-ended one, with serious implications for energy markets.”

Deutsche Bank’s Jim Reid noted that markets tend to rebound quickly from geopolitical shocks unless extreme escalation occurs. He cited historical data showing the S&P 500 typically dips 6% over three weeks before recovering, a pattern that may not hold if the conflict broadens.

Room for Market Disappointment

“The market reaction has been very modest,” said Philippe Gijsels, Chief Strategy Officer at BNP Paribas Fortis. “But that leaves room for disappointment if the U.S. is drawn in or the Strait of Hormuz is affected.”

Global observers remain on alert for further escalation that could impact global oil flows, draw in foreign militaries, or spark more instability across the Gulf.