Wednesday’s DBS Bank report paints a stark picture: Surging Middle East tensions from US, Israel, and Iran clashes will propel gold, dollars, and yen higher as premier safe havens. Investors are recalibrating portfolios amid the uncertainty.
Expect sovereign and corporate bond spreads to balloon, with monetary authorities unlikely to adjust policies soon. This dynamic reflects a classic risk-off environment.
Chief Economist Taimur Baig highlights Iran’s strategic edge in the Strait of Hormuz. Mines deployed there could throttle commerce without major naval clashes, driving up costs for shipping, insurance, and energy.
“Regime upheavals tied to Kurdish northern fronts and Baloch southern pressures might culminate conflicts, involving Turkey through Iraq in a wider war,” Baig observed.
Hormuz’s prolonged obstruction threatens catastrophic oil supply disruptions—Gulf exporters’ lifelines. In extremis, America’s strategic reserves would fall short of demand.
The bank models oil at $100-150 per barrel under full blockage, sparking inflation surges, Fed rate-cut paralysis, and global growth perils.
Silver falls short as a gold alternative for diversification, per DBS, burdened by 60% industrial usage and market fragility. With tensions mounting, gold’s allure as the ultimate safe asset intensifies.