Escalating US-Iran tensions have driven a surge in risk aversion, with Wall Street experiencing a sell-off on Thursday. However, several veteran market strategists argue that geopolitical risks typically cause only short-term volatility and rarely alter long-term market trends, suggesting this pullback could present a buying opportunity for investors.
On July 24, Yardeni Research President and economist Ed Yardeni, along with Fundstrat research head Tom Lee, stated in their latest reports that the market's reaction to the Middle East situation appears overdone. Both strategists noted that historical evidence shows similar geopolitical conflicts often lead to short-term market adjustments but can subsequently transform into buying opportunities.
During this sell-off, technology stocks were the hardest hit sector. The "Magnificent Seven" collectively lost $889.3 billion in market capitalization on Thursday, marking the largest single-day value erosion since the tariff shock in April 2025, further amplifying market volatility.
Market concerns primarily stem from the potential for further escalation of the US-Iran conflict. According to reports from Xinhua News Agency citing US media on Thursday, President Trump stated that day he was "seriously considering" restarting large-scale combat operations against Iran. Trump told US media he was "approaching" a decision on whether to launch a "massive attack" on Iran, an action that could surpass the scale of the "Epic Fury" military operation conducted against Iran in late February. Trump emphasized that no final decision had been made yet, but the US military was fully prepared.
Driven by risk aversion and rising oil prices, the S&P 500 Index fell 1.2% on Thursday, breaking below its 50-day moving average. However, with international oil prices retreating on Friday, market pressure has eased somewhat, leading to a slight rebound in S&P 500 futures. Strategists believe that if the conflict does not expand further, the geopolitical risk premium may gradually dissipate, and the market's focus is still expected to return to corporate earnings and economic fundamentals.
Short-term Conflict Disruptions, But Market Trends Remain Unchanged
As the US-Iran conflict continues to escalate, concerns over global energy supply have intensified, initially pushing international oil prices higher.
As a major oil-producing nation, any changes in Iran's situation could impact the global energy market. Tom Lee believes that compared to other countries, this conflict has a relatively limited potential impact on the US economy, and could even be somewhat beneficial, given that the US itself is one of the world's leading oil producers.
Yardeni noted that the resilience of the S&P 500 Index amidst rising geopolitical risks suggests investors are gradually recognizing that historical geopolitical crises often provide buying opportunities. "This time may be no exception," Yardeni said, adding that the current market is essentially betting that the US and Iran will ultimately seek to end the conflict.
Tom Lee also believes that the stock market's rapid decline in response to the conflict reflects uncertainty more than a deterioration in fundamentals. He pointed out that past phases of risk aversion like this have often become buying windows, and expects this time to be similar. Fundstrat data shows that during the first military confrontation between the US and Iran earlier this year, the S&P 500 Index fell approximately 10% before quickly rebounding.
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