Before the bell: war in the Middle East, but no market panic

While the Middle East is in turmoil, panic on the Asian stock markets this morning remains relatively limited. Gold and oil prices are already moving higher this morning.

“If the price of a barrel of Brent oil were to close at the current level (an increase of 7.5%), the percentage increase on a daily basis would be the 53rd largest in history,” according to Javier Blas, columnist at Bloomberg. A military attack on Iran, the assassination of the Supreme Leader and retaliatory actions across the Middle East have so far had no historic impact on the oil market. The fact that OPEC is increasing oil production to counter excessive price rises appears to be helping. In Asian trading we see limited losses. Japan’s Topix is down 1.1% and South Korea’s Kospi 1%. The biggest decliners are found on the Australian exchange among airline stocks. Shares of Qantas Airways (-5.2%) and Singapore Airlines (-5.3%) briefly plunged by 10% at the opening. Futures in the United States show similar losses of 1.3% for the Nasdaq after the technology index already closed lower on Friday. On that day the AI company CoreWeave (-18.5%) lost significant ground after announcing revenue growth of more than 100% in the fourth quarter while at the same time announcing that capital expenditures for 2026 will double to 30 to 35 billion dollar in order to accelerate the construction of data centres and AI infrastructure.

In Europe the expectation is that we will see a red opening shortly. Euro Stoxx 50 futures indicate a loss of 1.7% for the index. Belgian investors will soon get their first opportunity to react to the results of image technology group EVS. The company reported revenue growth of 5.1% and profit growth at the upper end of its guidance. The order book also increased by 11.3% compared with the same period last year. In addition, a rare press release appeared from chemical holding Solvac. Its participation Syensqo lost 39% of its market value over the past five trading days. “Solvac is following the situation with the greatest attention and maintains close contacts with the board of directors and the management of Syensqo,” the press release stated. Later today Norwegian Cruise Line Holdings, Riot Platforms, Plug Power and AST SpaceMobile will also report quarterly results.

Why we are not worried about Iran

We wrote about the Strait of Hormuz this weekend and also discussed it in Spamalot, but as investors at Spaarvarkens we are not really worried about the situation in Iran. One of the reasons is the Strait of Hormuz. We do not expect it to be closed anytime soon, although the media will focus on it daily from now on. Why are we not worried about a closure of Hormuz? Because that would be the death of the Iranian regime. Iran produces around 3.4 million barrels of oil per day, of which 1.6 to 1.8 million barrels are exported to China. These oil revenues form the backbone of the regime. Estimates vary, but that income stream is thought to represent between 50 and 70% of government revenues today. If that disappears, the Iranian regime would collapse completely. Speculation about it in the short term may nevertheless be positive for oil investors. We are talking about investors holding shares such as Occidental Petroleum and ExxonMobil. But it would not surprise us if that move proves temporary.The oil market is still facing a large oversupply and OPEC announced today that it will increase oil production to prevent excessive price rises. As an investor, do not blindly chase price increases. Especially in 2026 that oversupply is likely to persist.

What if losers become the new winners?

That brings us to another point. If we assume that the current geopolitical escalation will have only a temporary effect on the oil market, could today’s losers become tomorrow’s winners again within a few weeks? That could create opportunities for you when the market opens. Airlines are the first to be hit by higher fuel prices and disrupted flights in the Middle East. In Australian trading this morning we already saw large losses at Qantas and Singapore Airlines. Those shares even opened up to 10% lower before being bought back. Could opportunities also arise shortly in Europe in companies such as Ryanair or Wizz Air Holdings? That is something worth monitoring. Consumer stocks and interest-sensitive growth stocks are also historically under pressure when fuel costs rise and inflation expectations increase. We consider the oil price increase to be temporary. If you see such shares falling sharply today, we would regard that as a buying opportunity. “Buy when there is blood in the streets” was not for nothing the motto of the eighteenth-century baron Nathan Rothschild.

Did you know…

that stock markets in the Middle East are also open on Sundays? In Egypt the EGX 30 fell 2.5% on Sunday, while in Saudi Arabia the Tadawul All Share Index declined 2.2%. Both indices lost 5 to 6% at the opening, but calm returned afterwards.

This article was translated from Dutch and was originally published on Spaarvarkens.be.