Josh Gilbert, Market Analyst at eToro
Markets are entering the week with a heightened sense of caution, as investors weigh the potential for further geopolitical escalation. Volatility is set to pick up with bitcoin sliding below $100,000, equity futures falling, gold spiking and gold moving higher. Until we see signs of de-escalation, this flight to safety will likely continue.
Josh Gilbert, Market Analyst at eToro, remarks: That said, this kind of uncertainty is quickly becoming the new normal for markets, so I expect to see a relative sense of calm unless we see tensions keep rising, which, to be clear, it has the potential to do.
Oil is front and centre this week. Should retaliation target key oil infrastructure or disrupt shipping lanes, we could see oil continue to move higher in the short term. The key risk remains any disruption to the Strait of Hormuz, a key artery for global oil supply and a strategic corridor for the UAE and the broader Gulf. While oil flows have continued uninterrupted so far, even the threat of closure could rattle markets.
As a major energy powerhouse, the UAE has a lot riding on oil market stability. But unless there’s a material escalation, oil may struggle to hold recent gains, especially as OPEC+ continues to unwind supply cuts.
For equity investors, the key risk isn’t just geopolitics, it’s what higher oil prices mean for inflation and rate expectations; that’s where the longer-term concern lies. We’ll see some key economic data this week, including inflation readings from Australia and the US, global growth signals and commentary from central banks.
So even without an immediate fallout, the mix of oil volatility and renewed uncertainty is likely to be enough to keep risk appetite subdued. The problem for investors is that right now, uncertainty is dominating the narrative.
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