Experts are warning that investors might be misreading the latest turns in the Iran war, including a brief reopening of the Strait of Hormuz on Friday with a "glass half-full view," according to a new report.
CNBC interviewed different analysts who cautioned that "complacent" investors risk getting wrong-footed as they continue to misread developments in the conflict, especially after markets surged on news Friday that the Strait of Hormuz had reopened.
That optimism had been powerful. the outlet noted that since a two-week ceasefire between the United States and Iran was agreed on April 7, investors had increasingly bet on de-escalation. Friday's announcement from Tehran that the Strait of Hormuz was open to shipping added fuel to that rally.
However, by Monday the tone had changed again. Reuters reported that shipping through the Strait of Hormuz had slowed to a near standstill after warning shots, vessel seizures and mounting fears that the fragile ceasefire could collapse. Only three ships crossed the strait in 12 hours, far below normal traffic, underscoring how fragile the situation remains even when markets briefly trade as though a resolution is at hand.
Matt Gertken, chief geopolitical strategist at BCA Research, told CNBC that many investors have come to interpret Middle East developments through the same lens they used for President Donald Trump's tariff moves, assuming he can raise tensions and then cool them down at the ideal moment. Gertken said the market is effectively acting as though Trump is "the maestro," fully in control of the tempo. But he also warned that Iran is operating with a much "higher pain threshold" after being directly attacked, making the conflict less predictable than tariff brinkmanship.
Patrick O'Donnell, chief investment strategist at Orbis, made a similar point to the outlet. He said equity markets appear to be looking at the conflict with a "glass half full" mindset, while the real question remains whether the Strait of Hormuz will actually reopen durably. CNBC noted that about 20% of the world's oil and liquefied natural gas supply passes through the waterway, making it one of the most economically sensitive choke points on earth.
According to Reuters, oil prices rebounded nearly 5% over the weekend as traders worried the ceasefire could fail and energy flows through Hormuz would remain disrupted. Brent climbed to $94.99 a barrel, and U.S. crude rose to $88.18, reversing some of the sharp drop that followed Friday's brief burst of optimism.
Deutsche Bank's head of macro research, Jim Reid, compared the current moment to the early weeks of Russia's war in Ukraine in 2022, when the S&P 500 rallied more than 10% on hopes of a quick negotiated settlement, only for investors to be badly disappointed as the war dragged on. The index ultimately fell about 25% from its January peak to its October trough that year and ended 2022 down 19%, its worst annual performance since 2008.
Originally published on IBTimes
