Heightened conflict in the Middle East and subsequent oil supply disruptions would likely spur investors toward traditional safe havens, according to Betashares senior investment strategist Cameron Gleeson. These safe havens include gold, the US dollar, and US government bonds, all of which could see increased investment amid prolonged instability. Betashares is an Australian investment management company offering exchange-traded funds (ETFs). They provide investors with access to a range of domestic and international markets.
Gleeson noted that gold could potentially reach new highs after recovering from a pullback in late January. The economic impact of the conflict would vary across different regions, with the United States being relatively insulated due to its higher domestic oil production. Conversely, Europe, Japan, and China, which rely more heavily on imported energy, would face greater growth challenges from sustained higher oil prices.
Equity markets would also experience shifts, with energy companies likely benefiting from higher oil prices. Additionally, defence stocks could see gains if an extended conflict involving Iran prompts the US and its allies to significantly increase spending on munitions and equipment.
However, Gleeson cautioned that if tensions ease rapidly through military resolution or negotiation, oil prices could fall below $US70 per barrel. He drew a parallel to the market’s reaction following Israeli and US strikes on Iran in June of the previous year, where prices retreated once immediate fears subsided.
