The upward reaction of the markets to the “Third World War”

Don't panic. This is the message coming from the markets after a weekend marked by geopolitical tensions due to Iran's attack on Israel. For the moment, market sentiment is therefore not based on a possible widening of the conflict in the region. In fact, the week opened under the banner of optimism and contrary to expectations, “investors demonstrated surprising resilience in the face of a possible escalation, engaging in share purchases under the weight of geopolitical uncertainties and pressure from the bond sector”, explains Gabriel Debach, Italian market analyst of the eToro investment platform. To make everything more real is the yield of the American ten-year bond which saw an increase of more than 2%, reaching levels not seen since November last year, the Volatility Index, which represents one of the most common tools for measuring sentiment of the declining market, and gold and oil, which usually rise in situations of severe stress, which instead have undergone downward corrections. “The data on retail sales in the United States also contribute to supporting this optimistic climate, which recorded an increase of 0.7% in March 2024, higher than expected (+0.3%) and seen on the rise, furthermore, the previous February estimates. These data suggest continued resilience in consumer spending, indicating that the consumer-led economy remains strong,” Debach emphasizes.

Israel's reaction does not move the markets

The spread of the news of a possible Israeli response to the Iranian attack triggered “decisive fluctuations in the markets, influencing oil, gold and the stock market in particular”, explains Debach, specifying however that “these initial reactions quickly stabilized when it emerged that Israel's intent would be to limit the damage to Iran by avoiding a large-scale conflict.” The declaration that Israel intends to proceed with coordinated action with the United States has also “further influenced the markets, causing oil and stocks to return to their original trajectory”. Although it is risky to draw conclusions after a single day, current signals indicate that the stock market could, for now, exclude the possibility of an immediate military escalation, and therefore a possible widening of the conflict.

Positive results at the end of the day also arrive for the financial markets of the Old Continent. In fact, Piazza Affari closes on the same bullish wave as the other Euroland price lists and meanwhile on Wall Street the S&P 500 marks an increase of 0.33%.