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Major U.S. stock indexes lost ground last week as markets navigated a bumpy month, and investors faced a shaky start after the U.S. and Israel attacked Iran over the weekend.
Oil prices are expected to rise amid concerns that supplies from the Middle East could be disrupted, while investors are likely to reduce exposure to risky assets, including stocks, according to analysts. Gold, which has reached a series of record highs in recent months, could benefit as investors seek safe havens.
The bombing of Iran early Saturday killed Iran’s Supreme Leader, Ali Khamenei, and caused damage throughout the country. It triggered retaliatory strikes by Iran against Israel and U.S. interests in several countries across the region over the weekend.
Franklin Templeton Institute analysts, led by Chief Investment Strategist Stephen Dover, said the initial market reaction to this type of event would typically involve Treasury yields moving lower and equities falling, reflecting a “risk-premium repricing.”
Oil and natural gas prices are seen as especially vulnerable to sharp increases. Analysts pointed to both the region’s role as a major producer and rising shipping costs.
Charu Chanana, Chief Investment Strategist at Saxo, said oil prices are likely to “gap higher,” and that the move may not fade quickly because the market is not only pricing barrels, but also the cost of moving them. Even without a full shutdown, she said higher war-risk premia, rerouting, and insurance repricing can keep crude and freight costs elevated.
Even before the Iran attack, oil prices were already rising on concerns about potential military action in the Middle East. Brent crude oil futures, the global benchmark, closed Friday near $73 per barrel—its highest level since June. Brent futures have gained about 20% since the start of the year.
Gold has already hit multiple record highs in recent months, and analysts expect it to be a beneficiary if investors continue shifting toward safe-haven assets.
Chanana said airlines and other travel and leisure companies could be hurt by rising fuel costs and lower demand. Shares of shipping companies and firms exposed to global trade are also vulnerable.
On the other hand, many energy stocks would benefit from higher oil prices. Chanana also said defense, security, and critical infrastructure providers appear to be well-positioned.
“Gold, defense and other security-linked enablers are increasingly becoming core building blocks as geopolitical risk becomes more frequent rather than exceptional,” Chanana said. “In that environment, active risk management matters, because leadership can rotate quickly as the map changes.”
Investors are expected to gauge the market impact later Sunday when futures trading starts at 6:00 p.m. ET. Bitcoin, which trades continuously seven days a week, dropped as low as $63,000 early Saturday, down from a Friday high around $68,000, but had rebounded to $66,400 by Sunday afternoon.
Major U.S. stock indexes lost ground last week to cap off a rocky month of trading shaped by investor concern about AI-related disruptions, fresh uncertainty about tariffs, and the outlook for the economy and interest rates. The yield on the 10-year Treasury notes, which influences interest rates across consumer loans, closed Friday at its lowest level since October 2024.
Franklin Templeton Institute said geopolitics often produces an initial jump in risk premia before investors assess whether the aggregate earnings impact is modest. The firm said it would not yet label the situation a “clean buy-the-dip setup,” adding that duration, shipping/insurance mechanics, and the endgame matter more than the first headline.
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