Geopolitical Risk and Market Impact - On February 28, 2026, the U.S. and Israel launched a preemptive military strike against Iran, escalating geopolitical tensions in the Middle East[1] - The duration of the conflict is a key variable influencing asset performance, with historical precedents indicating outcomes can range from quick victories to protracted wars[2] Historical Context and Asset Behavior - Historical conflicts show that asset prices typically rise on expectations but may fall once the reality of war sets in, exemplified by the "buy the rumor, sell the news" phenomenon[2] - Oil prices are the most sensitive to conflict changes, with significant price fluctuations observed during past conflicts, such as a 13% increase in WTI crude oil prices prior to the June 2025 conflict[11] Current Conflict Analysis - The current U.S.-Iran conflict is characterized by a stronger Iranian response compared to previous conflicts, with potential scenarios ranging from internal leadership changes in Iran to escalated military actions[3] - The market's risk appetite is expected to fluctuate based on the conflict's duration and intensity, impacting oil prices and other assets significantly[3] Asset Class Reactions - Oil prices could rise by 10%-20% if the Strait of Hormuz is blocked, which is critical for global oil supply, as it accounts for approximately 20% of daily oil transport[40] - Gold and silver are expected to react positively to the conflict, with gold's price logic being stronger than in previous conflicts due to the current monetary policy environment[39] Stock Market Dynamics - U.S. stock markets may experience short-term volatility but are likely to maintain a bullish trend in the long run, as seen in past conflicts where markets recovered after initial shocks[41] - A-share markets showed a cumulative decline of 2.16% during the conflict escalation phase but rebounded by 3.84% following the de-escalation announcement[21] Bond Market Considerations - The domestic bond market is expected to be less affected by geopolitical tensions, with movements primarily driven by domestic economic factors and market sentiment[22] - If inflation expectations rise due to increased oil prices, the bond market may face downward pressure, but the primary focus will remain on domestic economic indicators and policy responses[43]