Is the Middle East situation cooling down? The market first asks: what about oil prices?

When Donald Trump says that the Iran conflict is nearing its end, ordinary people might think of peace, but investors think of three other words—risk premium.

In financial markets, many prices actually contain an "emotional component." For example, oil prices often include an extra premium during wartime because the market fears supply disruptions.

Once this premium disappears, prices can quickly fall back.

This phenomenon has occurred many times over the past decades. When geopolitical conflicts erupt, oil prices rise; when tensions ease, oil prices retreat.

But the problem is, the market finds it hard to judge when such changes will happen.

If Trump's judgment is correct and the conflict is truly nearing its end, three possible developments could follow:
First, oil prices gradually decline.
Second, demand for gold as a safe haven decreases.
Third, risk appetite in the stock market rebounds.

This combination usually drives risk assets like tech stocks and growth stocks higher.

However, investors are also very aware that the Middle East situation tends to be cyclical. Today’s easing could be followed by new conflicts tomorrow.

So many institutions are now adopting a "semi-optimistic strategy":
Maintain exposure to both risk assets and safe-haven assets.

This approach may seem a bit contradictory, but it is actually very rational. Because in uncertain times, the most important thing is not to bet on the right direction but to avoid extreme risks.

There is a classic principle in financial markets:
When the future is unclear, staying flexible is more important than making predictions. $GT ‌#特朗普称伊朗战事接近尾声