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Geopolitics · Iran · Market Volatility · Oil
Investors are grappling with significant frustration and uncertainty as President Donald Trump's latest deadline for Iran approaches, forcing them to prepare for a range of binary outcomes and sparking weeks of market volatility, with the dollar gaining 2% since attacks began.
Traders are buying more bonds, loading up on commodities, or holding cash, all while sharing a common view of exasperation over Trump's shifting positions. Jeffrey Palma, head of multi-asset solutions at Cohen & Steers, states that investing on binary outcomes is extraordinarily difficult, expecting inflation to stay higher for longer, with particular pressure on energy and commodity prices.
Gary Dugan, CEO at Global CIO Office, is lightening equity bets and buying oil through exchange-traded funds. Markets fluctuated ahead of the deadline, with stocks falling and oil advancing after reports of blasts on Iran's Kharg Island.
David Kruk, head of trading at La Financiere de l’Echiquier, notes that while initial bets were bullish, investors now buy options to protect against escalation, indicating the "real pain trade is upward." Trump has emphasized freedom of navigation through the Strait of Hormuz as a priority, despite recent contradictory statements. Chris Turner, head of FX strategy at ING Bank NV, expects the dollar to remain bid until news of a ceasefire or prolonged postponement.
Hideo Shimomura, senior portfolio manager at Fivestar Asset Management Co., suggests markets are becoming inured to Trump's threats, shifting focus to Iran's response. Nick Twidale, chief market analyst at AT Global Markets, describes traders as exhausted and frustrated, holding long dollar positions for liquidity due to the binary nature of the outcome.
