The IDF reports a fourth wave of missiles from Iran towards Israel amidst calls for a ceasefire. Despite this, markets remain stable, showing little disturbance from the Middle Eastern tensions at the moment.

Last week, markets seemed eager to move past the Middle East unrest. Trump’s decision for US intervention did not cause major shifts, especially since Iran has not responded with severe measures, suggesting a possible settling of tensions.

Political Narrative and Market Responses

For markets, the political narrative is one of de-escalation. Although attacks persist, without further intensification, market responses are unlikely to change dramatically, barring renewed escalations.

The situation mirrors the ongoing Russia-Ukraine conflict, which hasn’t entirely ceased. Such conflicts often act as checkpoints for the media and markets, who quickly move beyond the initial shock.

Ultimately, global focus shifts rapidly, with new stories emerging. The markets’ reactions to recent geopolitical tensions may soon dwindle as other events take precedence, reflecting the fast-paced nature of news cycles and economic interests globally.

While recent missile exchanges continue, there’s been a noticeable lack of reaction from asset prices, particularly in more speculative markets. Volatility gauges across most indices barely ticked upward. This kind of detachment typically tells us that participants expect events to remain contained within their current bounds. The focus has subtly shifted; instead of responding impulsively to every development, there’s a more calculated form of complacency settling in.

We’re seeing similarities with past instances of geopolitical turbulence—where initial alarm gives way to indifference if the disruption doesn’t extend into trade routes, energy outputs or financial systems. With the broader conflict showing no sign of spreading regionally, there’s little to indicate any material disruption to oil flows or supply chains. Brent prices, after modest upward flickers, have stabilised again.

Monetary Policy Meeting Outcomes

Last week’s monetary policy meeting outcomes added another reason for traders to look past the headlines. Powell’s team maintained its stance, reinforcing ideas that rates may stay in their current range a bit longer. The comments were less about inflation itself and more geared towards supporting steady financial conditions, reducing the need for aggressive repricing in either bonds or equity-linked assets.

From our perspective, narratives that lack direct economic impact tend to fade in trader awareness. This is not to understate events, but it does highlight a core principle: markets are forward-looking mechanisms. They absorb public concern quickly and adapt if the scenario doesn’t interfere where it counts—liquidity, credit conditions, or earnings trajectories.

Analysis desks continue to emphasise hedging caution, but few are adjusting their base cases this week. In options markets, demand for downside protection is present, though not markedly elevated. This subtle gap between concern and action suggests prevailing stability, not a calm before any storm.

We find value in monitoring volume rather than headlines. When fighting first intensified, there was a spike in index puts—those have now rolled off or been adjusted upward. This behaviour suggests more short-lived hedges rather than sustained bearish outlooks.

For the coming sessions, derivatives positions are likely to be concentrated around key earnings releases and inflation prints. The geopolitical theatre, although ongoing, lacks fresh elements that materially force budgetary or policy shifts, which means the positioning wheel keeps turning based on local economic data rather than global conflict exposure.

Looking over into commodities, flows into safe havens cooled. Gold lost some of its momentum last Wednesday and open interest in near-dated futures contracts decreased. There’s been no evidence of large institutions adjusting collateral portfolios in response to developments abroad.

One should watch the bond market for signs of repricing, though even there, the recent auction results point to steady demand. Ten-year yields remain in a tight corridor, driven more by supply expectations and domestic policy outlooks than geopolitical fear.

While aggression continues, market participation reflects selective sensitivity. Across the board, we’re seeing confirmation that traders are treating political unrest as a background consideration—not a trigger for sweeping correction strategies. As new macroeconomic data arrives, attention will likely turn again to inflation, wage growth, and earnings season—each feeding more directly into options volatility and positioning than missiles counted in news bulletins.

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