! The US-Israeli showdown with Iran reshapes the flow of funds! Oil, US bonds, and gold soar together as "risk aversion" returns to the stock market.

Realizing that the new round of geopolitical conflicts in the Middle East, which are unpredictable and developing rapidly, has heightened anxiety and concern among global investors, and further strengthened their strong demand for traditional safe-haven assets such as US Treasuries, gold, and the Swiss Franc since the beginning of this year. At least in the short term, financial market strategies will clearly lean towards prioritizing safe-haven assets (the so-called "buy safe assets first, then raise questions and doubts" strategy), with funds likely to continue flowing rapidly and on a large scale from stocks and other risk assets to US Treasuries, gold, and other major safe-haven and defensive assets. Macro traders generally believe that all global investors will focus on energy and major safe-haven markets. When financial markets resume trading on Monday, traders in the early trading of the ASIA FINANCIAL market were actively seeking safe-haven assets, primarily seen in the early rise of spot gold by 2% in Asia on Monday, a rapid increase in the US dollar against other currencies, a continued downward trend in the 10-year US Treasury bond yield, nearing the significant level of 3.90% - indicating a significant increase in US Treasury bond prices, a slight increase in the Swiss Franc against major currencies, while the Japanese Yen showed minimal changes. Simultaneously, the financial market investors were most concerned about the opening performance on Monday, specifically the international crude oil benchmark - Brent crude oil futures prices surged by 13%, WTI crude oil prices by over 10%, but immediately narrowed to around 7%. As the US President Trump's heavyweight announcement of possible military actions against Iran may last for four weeks, and the conflict spreads beyond Iran and Israel to other Middle Eastern economies - such as Lebanon starting the latest round of rocket attacks on Israel, the continuous unpredictable geopolitical turmoil in the Middle East, along with the potential ripple effects of rising oil prices, has given fund managers new reasons to sell stocks and further seek safe-haven assets. The new round of geopolitical conflicts in the Middle East has led to an increase in demand for safe-haven assets, strengthening the US Treasury, gold, and safe-haven currencies, while the stock market is inevitably under pressure due to the market's "risk aversion" sentiment. At the same time, the market is weighing whether to quickly position itself in risk assets such as stocks and cryptocurrencies when they fall. Some strategists warn against rushing to buy or bottom fish stocks and other risk assets. In the context of the latest US-Israeli military strikes against Iran and Iran's retaliation, global financial markets are currently in a phase of high risk aversion and high uncertainty. The reaction of "taking refuge first and then questioning" conforms to the classic risk aversion model: when geopolitical risks suddenly rise and may threaten the global energy supply chain (with about 20% of oil and liquefied natural gas transported through the Strait of Hormuz), investors often seek assets with high liquidity and strong capital preservation attributes. Therefore, the recent strong demand for safe-haven assets may drive gold prices higher, bond yields lower, energy stocks higher, and cyclical/high valuation stocks lower. Mid-term market strategies need to combine two key factors: whether the conflict will continue to escalate into a long-term regional war; and the feedback mechanism of oil prices and inflation expectations on macro policies. If the conflict is controlled in the short term, oil prices fall, the market sentiment eases, then buying risk assets such as stocks, cryptocurrencies at low levels may be a rational strategy - especially against the backdrop of a dovish stance of the Federal Reserve, providing attractive valuations. Conversely, if the conflict continues and further disrupts energy supply (such as prolonged substantial disruption in shipping through the Strait of Hormuz), the market will be in a long-term state of risk aversion, and risk assets will continue to be under pressure, thus investors will need to maintain safe-haven positions and carefully manage exposures. In the short term, the main strategic priority in global financial markets is still favoring safe-haven asset allocation, focusing on bonds, precious metals, safe-haven currencies, and defensive sectors; when the conflict no longer significantly worsens and macro fundamentals still support growth, gradually positioning in risk assets at low levels in the medium term, especially looking for structural opportunities after excessive pessimism. This phased strategy reflects both the direct impact of geopolitical risks on the market and the possible recovery potential from long-term economic and valuation perspectives. In the new round of Middle Eastern geopolitical crises, Wall Street is turning to the classic strategy of "prioritizing safe havens" for safety. "Macro traders will adopt the classic strategy of 'prioritizing safe havens, asking later,'" said John Briggs, head of US rate strategy at Natixis. "The US-Israeli joint military strikes and Iran's subsequent retaliation scale may exceed market expectations," he said. Briggs added that he expects the trend in US Treasury prices to continue to rise from last Friday - the prevailing pessimistic market views since February, driven by the US-China trade war, have pushed US Treasury prices higher due to safe-haven demand, especially short-term US Treasury yields falling to the lowest level since 2022. The trend of Brent crude oil futures prices, which are the international oil price benchmark, is another focus for Wall Street strategists. Dave Mazza, senior strategist at Roundhill Financial, said that he is closely monitoring the actual transportation situation in the Strait of Hormuz, as this narrow waterway carries a quarter of global sea-based oil and LNG trades. Based on current market dynamics, although there has been no official announcement from Iran on closing the strait, tanker monitoring shows no tracks of tankers in the Strait of Hormuz, with most tankers or large LNG transport ships being stuck in the area, and some transportation ships in the area are choosing to take a wide detour. At least 150 oil tankers (including crude oil and petroleum product carriers) have anchored in the vast waters of the Gulf region across the Strait of Hormuz, according to reports. Traders have mentioned that buyers from Asia - where about a quarter of their liquefied natural gas imports come from the world's second largest exporter, Qatar - have been calling suppliers to inquire about alternative larger ships. Meanwhile, Egypt is trying to get shipment earlier, as its supplier, Israel, has already closed most gas fields. For a long time, oil tankers and LNG ships bound for Asia and Europe have had to pass through the Strait of Hormuz. Ship tracking data shows that at least 11 LNG ships that travel to and from Qatar have suspended operations to avoid this waterway. Exporters from the UAE, a smaller exporting country, also need to go through the Strait of Hormuz to export LNG. As shown in the graph above, US Treasuries and gold have risen sharply in recent days due to increased demand for safe-haven assets, while the US stock market has shown significant decline; the flow of funds into safe-haven assets has pushed government bonds and precious metals to rise. "This is concerning the macro risks of the Strait of Hormuz, not retaliation. If shipping remains open, the stock market can digest all of this," emphasized Dave Mazza from Roundhill Financial. "If not, all bets on risks will be off." The anxiety over the imminent US-Israeli joint military action has already seeped into the market last Friday. Brent crude oil closing prices hit the highest since July 2025, while the US stock market benchmark index, the S&P 500, dropped by 0.4% on the same day, marking its largest monthly decline since March. Strategists at Barclays Bank warn investors against hastily buying into any risk assets entering a correction, such as overvalued tech stocks. Investors have become accustomed to geopolitical conflicts fading quickly, but this new round of Middle Eastern events may last longer. Ajay Rajadhyaksha, Global Head of Research at Barclays, pointed out in a report that given the potential casualties in the US military, continued attacks on Iran's leadership, and interruptions in shipping through the Strait of Hormuz, this round of geopolitical conflict may last longer than before. "The potential risks and returns for risk assets such as stocks seem unattractive," he underscored. "If the stock market corrects by more than 10% (like the S&P 500 index), there may be a moderate buying opportunity. But at least, now is not the time." The following is a summary of the latest views of Wall Street major institutional investors and seasoned strategists on the financial markets: Kevin Gordon, Head of Macro Research and Strategy at Charles Schwab & Co., said, "If this conflict leads to a sustained rise in oil prices, it could trigger short-term inflation panic, which could disrupt the stock market. I do think investors need to continue to differentiate between frontier and baseline risks. If this conflict does not have a substantial downward impact on economic growth or earnings, any negative reaction in the stock market may be short-lived, and a buy-low strategy still works." Vincent Mortier, Chief Investment Officer at Amundi, said, "In the short term, while waiting for the clearer impact of the events, we can expect oil prices to rise by 5% to 10%, US Treasury yields to fall (indicating rising US Treasury prices), short-term increase in gold prices, and slight decline in stocks (about 1%). This also provides a real excuse for market markets near historical highs to make some reasonable profit-taking." Brendan McKenna, Emerging Markets Strategist at Wells Fargo, said, "This impact will likely weaken emerging markets in the short term." "Iran's response is more hawkish or hawkish than anything we've seen before, and the Strait of Hormuz is basically closed, and US-Israeli military cooperation is getting more aggressive towards Iran. This impact, combined with the generally high valuations and over-holding themes in emerging markets, should drive early risk asset sales." Gregory Faranello, Head of US Rates at Amerivet Securities, said, "US-Iran military action may last for weeks. We don't think it'll be long. Over the past four years, the yield range of US Treasuries has been fluctuating, and if investors urgently need a safe haven, there's still significant downside room for US Treasury yields. Ultimately, the yields will be driven by the Federal Reserve and the economy together. We don't believe this Iranian retaliatory action will alter the fundamentals of the US." Frank Monkam, Head of Cross-Asset Macro Strategy and Trading at Buffalo Gulf Commodities, said, "The Iranian strikes over the weekend were almost a perfect catalyst for sell-off in the stock market, and the recent rise in volatility may continue strong in the short term. However, geopolitical conflicts usually lead to temporary sales of risk assets, rather than a sustained bear market, so I expect once the Middle East situation is fully digested by markets, the stock market will stabilize again." Rajeev de Mello, Global Macro Portfolio Manager at Gama Asset Management SA, said, "The long-term escalation of hostilities between the US and Iran will primarily be transmitted through the oil market to emerging markets." "The vast majority of large emerging market economies are net oil importers, with energy playing a significant role in their import bills and inflation baskets. Higher oil prices will widen current account deficits, shrink real incomes, and force the central banks of emerging markets to make difficult choices between supporting growth and suppressing inflation expectations," he said. Joe Gilbert, Portfolio Manager at Integrity Asset Management, said, "Energy stocks and metal stocks will be the leaders in risk assets, and real estate and utilities are also classic defensive sectors for the market. As defense needs for large defense products such as national defense military industries may significantly increase due to the new round of geopolitical tensions, global defense stocks will also be eagerly sought after by investors. In addition, non-essential consumer stocks will be losers, as higher oil prices will damage demand for airlines and retailers." Maxence Visseau, Research Director in Dubai at Akweim Investment Company, said, "I expect US Treasury to drop at least 5 to 10 basis points in the initial market fluctuations," he said. "But the complexity lies in international oil prices. If oil prices rise to $80 to $90 due to the Hormuz conflict, long-term US Treasury yields will be tugged between safe-haven demand and repricing inflation expectations." "You may see a sharp steepening of the US Treasury yield curve, as the market starts to price in the possibility that the Federal Reserve will not continue to cut rates due to long-term inflation caused by oil prices, and the breakeven point may be pushed higher. The Fed has been stuck in a range of 3.5% to 3.75% benchmark interest rates for a long time, with inflation close to 3% - the energy shock making their job even harder and possibly forcing them to take a more hawkish monetary policy stance under the new Fed Chair Powell," he said. Stephan Kemper, Chief Investment Strategist at BNP Paribas Wealth Management, said, "I expect the stock market to decline significantly, as this will put pressure on market sentiment. The main downside risk comes from oil prices." "If oil prices continue to run at high levels, it may affect global economic growth prospects and inflat