Bond.az analysts warn that potential ceasefires in Iran and Ukraine may provide only limited relief to global markets. Investors could be underestimating the risk of renewed geopolitical tensions and persistent energy-price pressures.
Analysts say the chances of a short-term U.S.-Iran agreement to improve shipping through the Strait of Hormuz have increased modestly, but caution that any deal would likely fall short of restoring pre-conflict conditions.
BCA analysts say markets would initially welcome an Iran agreement, yet oil and commodity prices could remain significantly above levels seen at the start of the year. Tehran's strategy appears aimed at securing a ceasefire while maintaining some leverage over global energy supplies.
BCA also warns that the Russia-Ukraine conflict could become more dangerous before any settlement is reached. Russia may use higher energy revenues generated by recent oil-market disruptions to intensify military pressure on Ukraine and test Western unity.
While a ceasefire would ultimately be in Moscow's economic interest, BCA says the risk of a major Russian provocation designed to expose divisions within NATO has risen.
Given those risks, analysts advise investors to remain overweight U.S. equities relative to European assets and maintain exposure to the U.S. dollar and Japanese yen until ceasefires in both Iran and Ukraine are firmly established.
They also recommend staying cautious on stocks and bonds broadly, arguing that markets may have already priced in much of the potential good news from a de-escalation in the Middle East.
