The rapidly spreading conflict in the Middle East has intensified investor anxiety. As Asian markets opened, traders flocked to safe-haven assets such as the U.S. Dollar, Gold, and the Swiss Franc. The market is currently laser-focused on shipping conditions in the Strait of Hormuz, where any disruption could trigger volatility in international crude oil prices. Sustained rises in energy prices would not only increase corporate operating costs but could also bring inflationary pressure to the global economy. How should investors configure their asset allocation in response?

Capital Shifts to Traditional Safe-Haven Assets

The expansion of the conflict in the Middle East has increased market uncertainty, with many investment institutions adopting a "safety first" strategy, as the scale of attacks and retaliation exceeded market expectations. In recent trading, the U.S. Dollar has shown strength, and the Swiss Franc has risen slightly against major currencies. The surging demand for these safe-haven assets reflects market concerns over high valuations in global stock markets. Facing geopolitical risks, managers are choosing to reduce risk exposure, making Gold and Treasury bonds key destinations for capital preservation.

Concerns Over Energy Supply and Inflation Pressure

The core macroeconomic risk of this conflict lies in the transport security of the Strait of Hormuz, a narrow waterway that handles approximately one-quarter of the global seaborne crude oil trade. Market institutions assess that if shipping is obstructed, crude oil prices could see a short-term increase of 5% to 10%. Rising energy prices would directly drive up production and logistics costs, triggering inflationary pressure in global markets. Particularly for emerging markets highly dependent on energy imports, high oil prices will widen current account deficits and compress real income, exposing economies to the potential risk of Stagflation (economic stagnation accompanied by rising prices).

Stock Market Sector Rotation and Central Bank Policy Challenges

Against the backdrop of geopolitical conflict and high oil price risks, global stock markets face varying degrees of repricing pressure. Industry sectors are showing significant divergence: defensive stocks such as energy, metals, defense, and utilities are performing with relative resilience; conversely, retail and aviation industries, which rely on consumer spending, are vulnerable to rising costs. Furthermore, if oil prices remain high for an extended period, the Federal Reserve (Fed) will be caught in a dilemma between combating inflation and supporting the economy. If monetary policy is forced to tighten, it will further affect changes in the global bond yield curve. Overall, the long-term impact of geopolitical events on the market still depends on whether there is a substantial disruption in energy supply.

Is Bitcoin a Safe Haven or a High-Risk Asset?

Following the news of the conflict on Saturday, the price of Bitcoin dropped from 65K to 63K. However, a significant rebound occurred on Sunday, with BTC briefly rising above 68K (up over 2%), though it had drifted back down to 66K by press time. Amidst the demand for hedging versus capital withdrawal, will Bitcoin act as a safe haven or a high-risk asset this time?

Abu Dhabi Securities Exchange and Dubai Financial Market Closed for Two Days

The UAE Securities and Commodities Authority has explicitly announced that the Abu Dhabi Securities Exchange and the Dubai Financial Market will be closed on March 2nd and 3rd. This measure aims to avoid a potential market collapse following Iran's retaliation against U.S. and Israeli airstrikes.

Since Saturday morning, Dubai and Abu Dhabi have been subjected to hundreds of missile and drone attacks from Iran. Although most were intercepted, these attacks have sparked panic among residents and pose a significant threat to the UAE's economy and its status as a stable financial, logistics, and tourism hub.

The total market capitalization of the UAE stock exchanges reaches 1.1 trillion USD, ranking 19th globally. Its weight in the MSCI Emerging Markets Index is 1.4%. According to Bloomberg, such a closure is uncommon; aside from scheduled holidays, UAE stock exchanges typically only close during periods of national mourning.

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