Grégoire Kounowski, Head of Advisory at Norman K.
The joint operation carried out by the United States and Israel against Iran marks a turning point in the intensity of the conflict and increases the risk of regional destabilization. The sudden military escalation observed in the Middle East over the weekend has reignited tensions across financial markets. Israel launched a new wave of strikes on Tehran on Sunday, while Iran retaliated with missile barrages, a day after the assassination of Supreme Leader Ali Khamenei. Investors are particularly concerned about potential disruptions to production in several energy-producing countries, fueling worries about global supply.
As Asian and then European markets opened, the reaction was immediate. Capital flowed into safe-haven assets, with gold rising nearly 3% and the US dollar gaining 0.8%. At the same time, oil prices surged amid fears of supply disruptions. Equity markets came under downward pressure, with futures pointing to a lower opening on Wall Street, down 1.3% for both the Dow Jones and the S&P 500 and 1.6% for the Nasdaq. Major European markets are also trending lower, with futures indicating declines of 1.83% for Frankfurt’s DAX, 0.77% for London’s FTSE and 1.79% for the Euro Stoxx 50. Sectors most exposed to geopolitical tensions and higher oil prices, including airlines, cyclical industries and companies heavily reliant on international trade, are logically expected to post more pronounced losses.
Such geopolitical events are not unprecedented. The September 11 attacks, the war in Ukraine, the US–China trade war and the Covid-19 crisis all triggered episodes of sharp volatility. Each time, markets experienced acute short-term stress before moving toward normalization. Historically, equity indices have ultimately recovered their previous levels. Volatility is real, but it is generally temporary.
In this context, our portfolios display defensive characteristics designed to cushion this type of shock. Diversification is playing its full role, with exposure to safe-haven assets such as the US dollar, bonds and gold, all of which are trending higher at this stage. Tactical positions in oil are also benefiting from the rebound in prices. In addition, our structured solutions incorporate downside protection barriers ranging between 40% and 50%, providing a significant buffer against a moderate market correction. Exposure to the defense sector, which has been strengthened in recent months, also offers support in the current environment, while positions in cryptoassets remain broadly stable. The prudent and diversified architecture of our allocations should therefore ensure satisfactory resilience during this period of stress.
In the short term, equity markets may remain under pressure if the situation deteriorates further. However, our strategy is grounded in consistent discipline and measured opportunism. Geopolitical shocks often trigger rapid and sometimes excessive reactions, yet history shows that markets ultimately absorb such events. In the event of a significant correction, we stand ready to gradually increase equity exposure, as we have done during previous episodes of market tension. We favor implementation suited to a volatile environment, with progressive reinforcements rather than large, one-off interventions. The current episode once again highlights the sensitivity of financial markets to geopolitical shocks. While volatility may intensify in the near term, experience suggests that these phases are temporary and often create attractive entry points for disciplined investors. With diversified, defensive portfolios tactically exposed to safe-haven assets, we are approaching this period with caution while retaining the flexibility to act should opportunities arise.
