Market Reaction & Risk Assessment - Initial market reaction to the US attack on Iran is expected to be a knee-jerk sell-off of risk assets and a buying of haven assets, followed by a quick rethink [2] - The severity of the market reaction depends on whether the conflict remains regional or broadens to affect US assets or extends beyond the Middle East [3] - A contrarian view suggests that if the nuclear threat of Iran is significantly hampered, it could remove a major risk to Middle East stability and be a net positive for stocks [6] - Monitoring trade flows in the Strait of Hormuz, Red Sea, and Horn of Africa is crucial; major disruptions would trigger alarms, first in commodities, then FX, and finally equities [11][12] Oil Market - Oil prices initially increased by approximately 4%, later paring back gains but still up almost 3% [3][4] - Brent crude's movement above $80 a barrel, a level not seen since early January, is a key number to watch [4] - Whether oil prices remain at or exceed $80 will be determined by events in the Strait of Hormuz [5] Treasury Market - The Treasury market's reaction is complex, influenced by both the Middle East situation and the US fiscal situation [8] - Concerns about higher energy prices potentially leading to higher inflation could send bonds in the opposite direction [8] - Market activity in long-dated bonds is currently muted, with low volume and little price change, but this could change soon [9] Geopolitical Factors - Iran's response, and its severity, is a key factor to watch [11] - The Tel Aviv 35 index closed at a record high for six consecutive days, indicating a positive market sentiment in Israel [7]