What most influenced the markets this week? Trump's contradictory messages regarding the war with Iran, oil holding above $100, gold unable to decide whether it's a safe haven or a source of liquidity, and a Fed stuck on a "single/minimal rate cut" path. Throughout the week, signals from Washington dominated the markets' agenda. Trump eased global risk appetite somewhat by saying the war with Iran "could be over in two to three weeks"; safe havens like gold and risky assets found buyers simultaneously as the dollar index retreated. However, in subsequent speeches, while saying the war could end soon, he reiterated his warning that "we could hit Iran very hard in the coming weeks," short-lived this relief. This dual tone created a "price in a ceasefire / price in a new attack" dilemma in the market, increasing daily volatility. The critical distinction here is to build a portfolio resilient to both scenarios, rather than changing positions as headlines shift.
Brent crude oil remained above $100 this week, occasionally approaching $110, thus absorbing a price increase of around 30-35% in the last month. Even though potential new attacks in the Middle East or disruptions to maritime trade haven't been "fully" priced in yet, it appears markets are placing the energy shock on the table as a persistent risk. Gasoline prices in the US are significantly higher than pre-war levels, putting pressure on both household budgets and inflation expectations, and narrowing the Fed's room for maneuver.
At the beginning of the week, a weakening dollar and geopolitical uncertainty brought gold back to the forefront as a safe haven; the price per ounce tested its highest levels in recent weeks. However, Trump's statements suggesting the war could end soon strengthened the dollar, and volatility in risky assets accelerated profit-taking by investors; gold prices saw pullbacks of up to 3-4% in a single day. This dynamic reminds us that gold doesn't always act as a linear insurance policy. In times of stress, especially when leveraged positions need to be closed, gold positions can become a source of liquidity in a portfolio. Investors who invest in gold need to consider not only geopolitical issues but also the risk of global liquidity and margin calls.
At its last meeting, the Fed kept its policy rate stable within the current range, reiterating its commitment to a “slow and limited” rate cut path for 2026 and 2027. The FOMC statement described the effects of the Iran conflict on growth and inflation as “uncertain,” while emphasizing that rising oil prices could push inflation upwards again. This clearly puts a brake on the ingrained notion that “the Fed will loosen its grip quickly during a war.” In parallel with this, the search for direction in US equities is underway; while technology and growth stocks are experiencing short-term respites due to the possibility of a ceasefire, new threats are putting pressure on sectors outside of energy. Many global asset allocation reports highlight increasing the weighting of energy and defense, and preferring neutral/small positions in sectors more sensitive to war risk.
Trump's statements regarding Iran have led to more frequent intraday shifts in US equity futures; volatility has been particularly prominent in segments sensitive to war risk, such as industry, aerospace, and technology. In contrast, energy companies and defense industry stocks are relatively outperforming, driven by high oil prices and expectations of increased defense spending. The picture is more tight in Asian economies heavily reliant on Gulf oil: high energy costs are weighing on corporate profit margins and growth expectations, leading to sharp sell-offs in local markets. For global equity funds, this raises the risk of a gradual rotation in regional allocations from energy-importing to energy-exporting countries.
With geopolitical risk, an energy shock, and limited Fed easing operating simultaneously, there is no single "right story" for investors. A more realistic approach is to consider at least two main scenarios:
In a scenario where the war subsides relatively quickly and oil permanently falls below $100, there could be significant relief for equity funds, emerging market debt funds, and fixed-income assets.
In a scenario where the war drags on and oil remains permanently above $100, themed equity funds and selective currency-based instruments that avoid energy-sensitive sectors and shift from defense/energy/import to export could offer a relative performance advantage. The investor's advantage will be that they are not forced to choose a single asset; they can build a portfolio diversified across these scenarios according to their risk profile.
