Zhongtai: What impact does the conflict in Iran have on global assets?

Zhongtai releases a research report stating that the impact of the conflict between Iran and Israel on major asset classes is more short-term. In the short term, as long as the conflict in Iran is not substantially eased, oil prices will remain at relatively high levels. However, if Iran is able to quickly restore oil production, or if the conflict between the two sides can be eased through negotiations or other means, oil prices may experience a pullback. Currently, the logic of geopolitical conflict is dominating over tariff logic in the short term, causing safe-haven assets such as gold and the US dollar to see a significant increase. Unlike after equivalent tariffs, where capital markets no longer viewed the US dollar and US bonds as "safe-haven assets", in this round, these two types of assets may once again gain safe-haven properties. Unlike the one-way impact on the US dollar, the impact on US bonds is two-sided, and there is a risk of a rise in US bond yields due to increased inflation expectations caused by oil prices. Israel-Iran Conflict On June 13, 2025, the situation in the Middle East escalated rapidly as Israel launched a large-scale military strike against Iran. The catalyst for this conflict was Iran's nuclear enrichment activities, which Israel believed posed a serious threat to its national security. Therefore, Israel took preemptive military action by carrying out airstrikes on key targets such as Iran's nuclear facilities, missile launchers, and storage sites, and targeted multiple high-ranking Iranian officials. Iran subsequently announced its withdrawal from negotiations and stated that it would retaliate, leading to an escalation of the conflict between the two sides. Does the conflict lead to a significant shortage in crude oil supply? After the outbreak of the conflict, market panic quickly spread. Investors were concerned about the security of oil supply in the Middle East. The Middle East is one of the most important oil-producing regions globally, with Iran being a key member of the Organization of the Petroleum Exporting Countries (OPEC) and an important player in the global oil market in terms of production and exports. Israel's military actions raised fears in the market about disruptions in Iran's oil supply, leading to a rapid increase in oil prices. Global spot crude oil prices rose to $75.29 per barrel, a 6% increase from June 12, reflecting the market's strong reaction to the conflict between Israel and Iran. From a supply-demand perspective, the conflict has significantly altered market expectations for oil supply. On the one hand, Iran's oil production facilities were hit, leading to expectations of a significant decrease in its production. Even if Iran were able to quickly recover production, it would take time to make up for the production losses during the conflict. On the other hand, Israel's military actions could further destabilize the regional situation, indirectly affecting oil production in other Middle Eastern oil-producing countries. In this situation, concerns about oil supply intensified, driving up oil prices. The seesaw effect of risk assets and safe-haven assets emerges On the day of the conflict, there was a clear differentiation in the global financial markets. Risk assets, such as the stock market, generally declined, while oil and safe-haven assets such as gold and the US dollar rose significantly. On June 13, the spot price of gold rapidly rose and broke through the $3400 per ounce mark, reaching a new high since May 8. The US dollar index rose by 0.29% from the previous day. Although tensions between Israel and Iran are escalating, the likelihood of a large-scale war breaking out is low from a strategic perspective. This is mainly because Israel has firm support from the United States, while Iran operates with the support of Russia, and these two major powers themselves are not willing to be directly involved in military conflict. The confrontation between the two sides is mainly limited to a proxy level, with limited actions putting pressure and making statements, while maintaining the controllability of the conflict. Therefore, it is unlikely that the tense situation will evolve into a full-scale war in the region. Zhongtai believes that although the current friction between Israel and Iran may not lead to a large-scale war, this round of geopolitical friction may last longer than the conflict between India and Pakistan.