Iran was bombed over the weekend. Not just any airstrike, but a direct hit by the United States on its nuclear development sites, something that had been speculated for weeks but still felt like a serious escalation when it actually happened. You’d expect markets to tumble on news like that. They didn’t.
In the run-up to Monday, expectations were running hot. Traders and analysts, myself included, were warning of a turbulent open, possibly the start of a much larger risk-off move. There was talk of oil surging past $90, safe havens ripping higher, equities crumbling, and gold flying. “Doomsday Monday” was being thrown around without irony. But when markets opened in Asia, yes there was a gap, yes oil popped briefly, but it was all very… muted.
You often hear the phrase “markets hate uncertainty”, but that’s not quite true. What markets really hate is economic disruption. If Iran had shut down the Strait of Hormuz or oil supply had actually been hit, that would have been a different story. But with no immediate supply shocks, and the hope of de-escalation floating around, investors found a way to look past the drama.
Risk sentiment, somehow, managed to recover. Equities bounced. The yen, which initially caught a bid, started to ease. Gold couldn’t hold its highs. Even oil pulled back despite the overnight jump. Traders moved from panic to patience within hours. It makes you wonder whether markets have just become numb to geopolitical risks unless there is a clear and measurable impact on supply chains or economic fundamentals.
The reality is, this isn’t the first time the Middle East has flared up, and it won’t be the last. Markets have learned to distinguish between noise and disruption, and while this was serious from a geopolitical standpoint, it lacked the kind of follow-through that would normally spook investors for more than a few hours.
Of course, this doesn’t mean the danger has passed. Far from it. Tensions are high, and everyone knows retaliation is a possibility. The Strait of Hormuz remains a flashpoint. And in this kind of environment, all it takes is one wrong move, one miscalculated response, or one misleading headline to send risk assets tumbling again.
Still, the response so far shows how hard it is to second-guess markets these days. For all the analysis, for all the positioning, sometimes markets just choose not to care. That’s not to say it’s logical, just that sentiment can be surprisingly stubborn.
So yes, Iran happened. The US really did strike its nuclear infrastructure. Oil spiked, gold climbed, risk-off kicked in briefly. And then? Markets calmed down, and in some cases even rallied. We’re now in that uncomfortable in-between, not quite crisis, not quite business as usual, where investors are watching every headline and waiting for the next move.
Whether that next move is a further escalation or a diplomatic climbdown, it’s impossible to say. What we can say is this, the market reaction wasn’t what many expected. And that alone is worth paying attention to.
The Markets this Morning
European equities opened lower but didn’t spiral, the FTSE 100 dipped just 0.2%, the DAX and CAC slipped by a similar margin. Hardly the panic many had predicted. Airlines took a hit, as expected, with easyJet and Wizz Air both down around 2%, but oil majors like BP and Shell actually ticked higher on the back of firmer crude.
Oil gapped higher in Asia, with Brent briefly above $79 before slipping back towards $77.50 as the day wore on. Gold caught a bid early on but faded as cooler heads prevailed, stuck in a $3,340–$3,390 range.
In currencies, the dollar firmed up, not unusual in times like this, rising against both the euro and yen. But again, nothing explosive. Bond markets barely moved. The US 10-year yield held steady at 4.40%, while the 30-year edged up just a basis point.
Even crypto seems to have shrugged it off. After dropping to $98,000 over the weekend, Bitcoin is back above $101,000, reclaiming ground as risk appetite steadies.
All in, risk got nudged, not shaken.