Core Viewpoint - The global stock market is under pressure due to the outbreak of war in Iran, but the sell-off is less severe compared to historical similar shocks. Investors remain cautious based on three entrenched beliefs: the war will not last long, private credit will not trigger a systemic crisis, and policymakers will eventually intervene to support the market [1]. Market Performance - Since the onset of the conflict, the S&P 500 index has dropped over 3%, while the European Stoxx 600 index has seen a slightly deeper decline but is stabilizing. Notably, less than 20% of stocks in developed markets are technically oversold, and profit-taking remains limited, with small-scale buying observed last week [2]. Investor Sentiment - Barclays strategists warn that market nerves are increasingly frayed. Investors believe that the presence of Trump put options is a reason for the milder decline in global stock markets compared to past oil shocks. However, prolonged blockage of the Strait of Hormuz could exacerbate stagflation characteristics in the market [3]. Risk Aversion Dynamics - The current risk-averse sentiment is showing clear selectivity. Fund outflows are primarily concentrated in high-yield bonds, emerging market debt, and financial stocks, while broader market positions have not triggered sufficient "bear market panic" signals. Bank of America suggests that adjustments typically require three conditions to be met: oversold assets hitting bottom, overbought assets being sold off, and safe-haven assets losing appeal [4]. Policy Response Importance - The trajectory of the current situation is clearly bifurcated: if oil prices spike and then quickly retreat, inflationary pressures will be viewed as temporary, and the impact on growth will remain mild. In this scenario, central banks may choose to temporarily overlook price increases, ultimately benefiting risk assets. Conversely, if inflation and growth are both pressured, the stock market will face greater downside vulnerability [5]. Political Pressures - The impact of war on inflation and living costs may compel the U.S. government to seek a swift resolution to the conflict ahead of midterm elections [6]. Central Bank Policy Constraints - The policy space for central banks is narrowing, with the swap market fully pricing in European rate hike expectations, the withdrawal of rate cut expectations in the UK, and a reduction in rate cut expectations in the U.S. [7]. Anticipation of Policy Responses - The market is currently in a phase of assessing potential policy responses. If the conflict persists longer, central banks will likely respond in some form, although that moment has not yet arrived [8].