The strike marks a shift in the geopolitical stakes: the world’s largest military power has now directly joined the conflict. The US’ involvement in the conflict is fuelling concerns of escalation.

Oil prices jumped by as much as 4 per cent in early trading on concerns that the US strikes on Iran could lead to supply disruptions, particularly if Iran follows through on threats to block the Strait of Hormuz.

However, although oil prices rose on the news, Norbert Rücker, head of economics and next generation research at Swiss private bank highlighted risks to global energy supply amid concerns over a potential disruption in the Strait of Hormuz that would lead to significant spikes in oil and natural gas prices.

Goldman said in a note that prediction markets, despite limited liquidity, reflect a 52 per cent probability of Iran closing the Strait of Hormuz in 2025, citing data from Polymarket. It also noted that a fall in the Iranian supply of 1.75 million barrels per day could push Brent to a peak of around $90 per barrel.

Fixed income
From a bond market perspective, Dario Messi, head of fixed income analyst at Julius Baer, said the most important variable remains the oil price and the consequence for inflation and monetary policy. “The market assumption seems to prevail that oil prices will not rise uncontrollably. In other words, the global economic impact is set to remain limited for the time being, since it requires longer-lasting oil price shocks to feed into price pressure globally. This is also reflected in the first (admittedly early) market signals following the weekend events, with US Treasury yields and credit spreads rather stable,” Messi said.

Obviously, whether this prevails largely depends on Iran’s response and how the US intends to progress. Apart from this event on the geopolitical arena, he also focuses on how sentiment evolves in the US itself, after Trump’s decision to conduct the air strikes. From an investment perspective, Messi will not change portfolios erratically and remains invested in the belly of the curve, opting for a yield pick-up through some corporate credit risk rather than extending duration risk at this point. 

Julius Baer's views are shared by Chris Beauchamp, chief market analyst at (UBP) also believes that equity markets remain quietly confident. “While the fallout appears for now contained on global inflation, the conflict carries the potential to trigger a supply shock in global energy markets. Although geopolitical risks are rising, financial markets are currently not pricing in a worst-case scenario,” UBP said in a note. UBP maintains its convictions across asset classes, favouring equities over bonds and maintains a positive stance on gold, which remains a key hedge in the event of an extreme geopolitical shock.