Middle East Conflict Spurs Orderly Risk-Off, 10-15% Market Drop Forecast
Barclays reports that recent Middle East conflict has triggered orderly risk-off, with market weakness concentrated in Europe, Japan and emerging markets while U.S. assets remain relatively stable. Yardeni Research forecasts a 10% equity pullback from recent highs, rising to 15% if the Strait of Hormuz blockade persists.
1. Orderly De-Risking Post-Conflict
Barclays notes that the escalation of the Middle East conflict has prompted an orderly de-risking across global markets, with weakness concentrated in Europe, Japan and emerging markets more exposed to rising energy costs, while U.S. equities and volatility indicators have remained relatively stable.
2. Yardeni’s Correction and Stagflation Warning
Yardeni Research projects a 10% correction from recent equity highs, warning that a sustained blockade of the Strait of Hormuz by Iranian forces could deepen losses to 15%, heighten oil price spikes and increase stagflation risks in major economies.