Global equity markets are preparing for a volatile start after the United States and Israel launched Operation Judas Shield, a preemptive military strike on Iran that triggered rapid retaliation across the Middle East.
Iran responded with missile attacks targeting U.S. military installations and allied locations across the region, with explosions reported in Dubai, Riyadh, Abu Dhabi, Bahrain and Kuwait. The escalation followed the killing of Iranian Supreme Leader Ayatollah Ali Khamenei during the joint operation.
Israeli authorities also confirmed the deaths of several senior Iranian officials in the initial wave of strikes, including Defense Minister Aziz Nasirzadeh, Security Council head Ali Shamkhani and IRGC commander Mohammad Pakpour.
Despite the sharp geopolitical escalation, some market strategists argue that the long-term impact on equities may prove limited. Vital Knowledge analyst Adam Crisafulli noted that markets have historically absorbed geopolitical shocks relatively quickly.
“As has been the case in recent years, through multiple episodes of seemingly substantial geopolitical conflict, the impact on U.S. stock markets is typically fleeting, and there is no reason to believe this time will be any different,” Crisafulli said.
Barclays’ global head of research, Ajay Rajadhyaksha, struck a more cautious tone, suggesting Iran “may not have the capacity to sustain a military campaign,” and that recent missile launches could be intended largely for domestic signaling, “showing resolve without crossing a threshold that would require further US retaliation.”
Still, Rajadhyaksha warned that the overall risk backdrop has shifted. While the conflict could remain contained, he said the probability of broader escalation appears higher than in recent years.
He advised investors against rushing to buy equities during an initial market selloff. “History strongly supports selling the geopolitical risk premium when hostilities begin,” Rajadhyaksha said, while cautioning that investors may be underestimating the chance that tensions persist.
“We would recommend against buying in the event of an immediate decline—the risk-reward tradeoff doesn’t seem compelling. If stocks decline significantly (say, more than 10% for the S&P 500), it’s likely a good time to buy. But not yet,” Rajadhyaksha concluded.