“The initial reaction will be a flight to safety and equities will probably be weaker,” said Neil Birrell, chief investment officer at Premier Miton Investors. “The level that stock markets are standing at, they’re definitely going to face increased risk, there’s no doubt about that.”
Traders are forecasting a drop in stocks, a jump in crude prices and possibly a strengthening of the dollar as investors head for safety in the wake of the US attack on Iran’s three main nuclear sites.
Concern that the war will intensify even further is likely to push equity prices lower, while bonds may get a boost, market watchers say. The moves will be bigger if Iran responds with steps such as blocking the Strait of Hormuz, a key passage for oil and gas shipments, or attacking US forces in the region, they say.
