Global markets would experience a sharp and rapid decline if the United States enters direct military conflict with Iran, according to Nigel Green, CEO of deVere Group.
The financial advisory firm’s analysis suggests current market stability belies significant vulnerability to geopolitical shocks, with oil prices and risk assets positioned for disruption.
“Markets are pricing in rate cuts and stability, not war,” Green said. “US military action would force an immediate repricing of risk across all asset classes.” Brent crude has already risen 9% since tensions escalated, reflecting growing concerns about Middle East energy supplies. Analysts warn further price spikes could reignite inflationary pressures, complicating central banks’ policy decisions.
The warning comes as investors maintain unusually high exposure to risk assets despite escalating tensions. Market volatility indicators remain subdued, while equity valuations assume a soft economic landing. This complacency could amplify any selloff, particularly in technology stocks and emerging markets that have led recent gains.
DeVere’s research highlights three potential phases of market reaction: an initial sentiment-driven plunge, followed by sector-specific repricing, and finally a flight to quality assets. The firm notes Treasury yields have already dipped slightly as some investors seek safer holdings, while the US dollar has strengthened against traditional haven currencies.
Historical precedent suggests geopolitical events typically cause short-term market disruptions rather than prolonged downturns. However, analysts caution that current conditions – including elevated oil prices and delayed rate cut expectations – could exacerbate any selloff. The 2020 oil price shock and 2022 Russia-Ukraine market response provide recent examples of how quickly sentiment can shift.
Financial institutions are advising clients to maintain disciplined asset allocation while increasing portfolio liquidity. “The time to prepare is before the crisis hits,” Green said. “Diversification and risk management become critical when markets move from complacency to panic.”
