The ongoing conflict in the Middle East is exerting increasing pressure on US President Donald Trump to broker a resolution, according to Betashares chief economist David Bassanese. Bassanese suggests that the resilience of the Iranian regime may have surprised the US, and its ability to withstand attacks will determine the extent of pressure on Trump to seek a resolution. Betashares is an Australian investment management firm that offers a range of exchange-traded funds (ETFs). The firm provides investors with access to various asset classes and investment strategies.
Rising oil prices, fuelled by the conflict, are already impacting global markets. Bassanese noted the potential for a shift away from interest-rate-sensitive cyclical and technology sectors towards value-oriented defensive and resource stocks if a global energy shock occurs. These market realignments reflect investor anticipation of inflationary pressures stemming from energy supply disruptions.
Global bond yields have increased as investors factor in higher inflation risks. The yield on 10-year US Treasury bonds climbed to 4.14 per cent, while safe-haven flows strengthened the US dollar. Gold and the Australian dollar experienced declines amid these market adjustments. Economic data remains mixed, with US core CPI anticipated to remain steady at 2.5 per cent, close to the Federal Reserve’s 2 per cent target. The Fed’s preferred core PCED measure is forecast to slightly increase to 3.1 per cent.
Bassanese anticipates that the Iran conflict will continue to dominate market sentiment in the coming week, with attention focused on whether a resolution can be reached swiftly.
