Middle East geopolitical conflicts boost demand for safe-haven assets. What are the defensive assets?

The rapidly spreading conflict in the Middle East has heightened investor anxiety. As Asian markets open, traders are increasing demand for safe-haven assets such as the US dollar, gold, and Swiss francs. Currently, the market is highly focused on shipping conditions in the Strait of Hormuz, where any disruption could trigger fluctuations in international oil prices. If energy prices continue to rise, it will not only increase corporate operating costs but also potentially lead to inflationary pressures on the global economy. How should investors allocate their assets in response?

Funds Shift to Traditional Safe-Haven Assets

The escalation of the Middle East conflict has increased market uncertainty. Many investment institutions are adopting a “hedge first” strategy, as attacks and Iranian retaliation have exceeded market expectations. Recently, the US dollar has shown strength, and the Swiss franc has also appreciated slightly against major currencies. The rising demand for these safe-haven assets reflects concerns over the overvaluation of global stock markets. In the face of geopolitical risks, fund managers are reducing risk exposure, making gold and government bonds key destinations for capital preservation.

Energy Supply and Inflationary Concerns

The core macro risk of this conflict lies in the security of transportation through the Strait of Hormuz, a narrow waterway that carries about a quarter of the world’s seaborne crude oil trade. Market assessments suggest that if shipping is disrupted, crude oil prices could see a short-term increase of 5% to 10%. Rising energy prices will directly boost production and logistics costs, triggering inflationary pressures worldwide. For emerging markets heavily dependent on energy imports, high oil prices will widen current account deficits and squeeze real incomes, posing a risk of stagflation—stagnant economic growth combined with rising prices.

Sector Rotation and Central Bank Policy Challenges

Against the backdrop of geopolitical conflict and high oil prices, global stock markets face varying degrees of revaluation pressure. Industry sectors show significant differentiation: defensive sectors such as energy, metals, defense, and utilities tend to hold up better; conversely, retail and airline industries that rely on consumer spending are more vulnerable to rising costs. Additionally, if oil prices remain high for an extended period, the Federal Reserve may face a dilemma between combating inflation and supporting economic growth. If monetary policy shifts toward tightening, it could further impact global bond yield curves. Overall, the long-term market impact of geopolitical events will depend on whether energy supplies experience substantial disruptions.

Is Bitcoin a Safe Haven or a High-Risk Asset?

After the conflict news broke on Saturday, Bitcoin’s price fell from $65,000 to $63,000 but rebounded sharply on Sunday, briefly rising over 2% to above $68,000 before easing back to $66,000 by press time. Under the demand for safe-haven and flight-to-quality, will Bitcoin this time serve as a refuge or turn into a high-risk asset?

(Bitcoin as a Safe Haven? Middle East Conflict Sparks BTC Rebound to $68K)

Abu Dhabi Securities Exchange and Dubai Financial Market Closed for Two Days

The UAE Capital Market Authority announced that the Abu Dhabi Securities Exchange and Dubai Financial Market will be closed on March 2 and 3 to prevent potential market crashes following Iran’s retaliatory airstrikes on the US and Israel.

Since Saturday morning, Dubai and Abu Dhabi have been targeted by hundreds of missiles and drones from Iran. Although most attacks have been intercepted, these incidents have caused panic among residents and pose a significant threat to the UAE’s economy and its status as a stable financial, logistics, and tourism hub.

The UAE Securities Exchange has a total market capitalization of $1.1 trillion, ranking 19th globally. Its weight in the MSCI Emerging Markets Index is 1.4%. According to Bloomberg, such closures are uncommon; aside from scheduled holidays, the UAE exchanges typically only close during national mourning periods.

This article “Middle East Geopolitical Conflict Boosts Safe-Haven Demand: What Are the Defensive Assets?” first appeared on Chain News ABMedia.