Markets are currently reassessing the valuation logic of various asset classes. According to reports, the Israeli Defense Forces stated on the 8th that they had begun a new round of strikes against Iran's military infrastructure "nationwide." Due to the severe escalation of geopolitical conflict, concerns about disruptions to crude oil market supply intensified rapidly. The price of W&T Offshore (WTI) futures surged 12.67% on the 6th, closing at $91.27 per barrel.
As markets re-evaluate asset valuations, a key question arises: if this conflict evolves from a short-term shock into a prolonged confrontation, which assets currently face the danger of being severely overpriced?
Addressing this, Roukaya Ibrahim, Chief Commodity Strategist at global investment consultancy BCA Research, stated in a briefing that the currently resilient copper price might be a vulnerable asset, and investors should be wary of a short-term valuation bubble. Simultaneously, Chief Geopolitical Strategist Matt Gertken cautioned that, due to Japan's high dependence on external energy, Japanese equities could face significant losses under sustained冲击.
**Valuation Risks Amid Protracted Conflict** Ibrahim believes that if hostilities are prolonged, the seemingly sturdy copper price would show high vulnerability to downside risks. She explained that while copper has performed well in recent months, this was primarily driven by speculative demand in Asia, physical asset trading, and excessively high market expectations that "copper will become the next gold." Consequently, if global economic growth falls short of expectations, copper prices, lacking fundamental support, are highly susceptible to a pullback.
However, Ibrahim also emphasized, "We maintain a bullish outlook on copper's long-term trajectory; the current adjustment is more indicative of short-term or cyclical downside risks."
She also differentiated the prospects for various commodities. In an environment of slowing growth, major commodities like oil, natural gas, and aluminum反而 possess upside potential. Discussing the fragility of energy supply chains, she explained that the Strait of Hormuz, a critical chokepoint for global LNG trade, handles 20% of its volume. Unlike oil, there are almost no pipeline alternatives for natural gas transport. Furthermore, the region contributes 8-9% of global aluminum production and 35% of global urea exports via the strait. Since natural gas is a key input for fertilizer, this implies that fertilizer shortages and rising costs will inevitably feed through to downstream sectors, creating sustained upward pressure on agricultural prices.
Regarding the gold market, Ibrahim observed that prices have not shown the expected unilateral rise in recent days but have been fluctuating. She analyzed that this is primarily because gold is digesting the negative impact of high bond yields and a strong US dollar. "We warned a month ago that gold faced short-term risks within a tactical timeframe, as the previous sharp rally had accumulated excessive froth. The current muted performance confirms this," she said.
Nevertheless, she added that if supply disruptions are confirmed to seriously threaten global growth and geopolitical tensions remain elevated, safe-haven demand would ultimately outweigh the negative factors, pushing gold prices back onto an upward track. For precious metal allocation, she stated, "I prefer gold over silver because silver's industrial properties make it more vulnerable to an economic slowdown, whereas gold can benefit more purely from safe-haven inflows."
Gertken highlighted potential risks for Japanese equities. He stated, "Japan recently experienced a significant rally, benefiting from currency depreciation, a more dynamic domestic economy, and a positive political policy environment. However, the problem is Japan's extreme vulnerability to energy shocks. If Japan faces such a shock now, it would be very detrimental, both economically and politically. I believe this would hurt Japanese corporate profitability, as they would have to pay higher import bills."
From a global perspective, Gertken noted that in the US, the S&P 500 overall is showing signs of peaking and pulling back. Beyond geopolitics, market sentiment itself is already highly anxious. However, he added that energy stocks are still soaring, and there remains room for energy prices to rise further in equity market terms.
Furthermore, the trend of market rotation from US equities towards international stocks is undergoing a temporary reversal. "If the situation deteriorates, this reversal will certainly persist," he said. "I think this is at least a period of short-term US equity outperformance. But this depends on whether the oil impact lasts long enough to cause a global economic slowdown. If it's just a disruptive and volatile event, the rotation into international stocks will likely continue."
**Potential Market Developments** Regarding the crude oil market, Gertken said, "From a physical supply perspective, a major oil shock should be happening now. The Strait of Hormuz is effectively closed, with vessels refusing passage due to US warnings and self-preservation, and several tankers have already been attacked. However, the market has not fully reacted yet, mainly because investors are still assessing the conflict's duration and whether critical infrastructure will suffer permanent damage."
Gertken further warned that the risk of continued tanker attacks is very high, which could push oil prices even higher from current levels. Additionally, he cautioned investors against blindly applying past experiences. Analyzing from the US government's perspective, he noted that the previous administration's strategy often involved "escalation followed by de-escalation," a pattern observable in tariff and Venezuela-related events. Therefore, markets might easily assess the current situation as another "temporary hiccup" and look for entry opportunities. But he believes, "This time the pattern might be different."
"This implies markets could be trapped in a highly volatile environment. On one hand, the President might start signaling a willingness to resume negotiations, which the market would welcome. On the other hand, there is the potential for another successful attack [by Iran]," Gertken stated.
Given this uncertainty, Gertken advised maintaining safe-haven positions until there is clear, mutual confirmation of resumed negotiations and until clear leadership within Iran expresses a definitive willingness for a ceasefire.
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