Analysts Warn: This Middle East Crisis May Be Different, Advise Against Buying Any Dips Immediately

Odaily News As Iran launched missiles at US military bases in Gulf cities, airlines suspended flights, and oil tankers carrying oil and other products halted transit through the Strait of Hormuz, the situation has become more chaotic. Rong Ren Goh, Portfolio Manager at the Fixed Income team of Eastspring Investments, stated that tail risks in the Middle East have increased. The market will repricing, shifting from a geopolitical shock to a regime risk shock and a prolonged conflict, rather than just retaliatory actions, unless Iran expresses willingness to negotiate. Analysts believe a greater risk lies in market complacency. The market has been assuming the conflict's impact will be limited and has been dismissive of comparing this conflict to the 1979 Iranian regime change. Barclays analysts said history strongly suggests not to chase rallies when conflict breaks out, but rather to "sell the news." However, the concerning part is that investors have now become accustomed to the "sell the news" mentality and may underestimate the risk of the situation spiraling out of control. It is advised not to immediately buy any dips. If the stock market correction is sufficiently large, such as the S&P 500 falling more than 10%, then a buying opportunity may emerge. But not yet. (Jin10)