25.03.2026 - Illusion of De-Escalation
Investors continue to position for a ceasefire in the Middle East, effectively trading on hope, betting that diplomacy will prevail and that a worst-case energy shock can still be avoided.
The reality, however, remains far more complex.
The proposed 15-point ceasefire plan by US President Donald Trump has been rejected by Iran. Current Iranian leadership is not only dismissing the proposal but also ruling out negotiations altogether. At the same time, threats are expanding beyond the Strait of Hormuz, with warnings of potential disruptions in the Red Sea. Such a scenario would force vessels heading towards Europe to reroute around South Africa and the Cape of Good Hope, adding roughly 10 to 15 days to shipping times and significantly increasing global supply chain pressure.
Meanwhile, attacks on energy infrastructure continue.
Markets: negative correlation to oil
Equities: gains
Bonds: yields lower - US 10-year Treasury yield at 4.33%
Commodities: oil prices fall - WTI crude oil USD90/barrel and Brent towards USD 101/barrel. Precious metals gain back some of the losses - silver at USD 72/oz and gold above USD 4’550/oz
Currencies: USD stable
Cryptos: up - Bitcoin USD 71k
Volatility: The VIX declines to 25
My View: In my view, markets are underestimating the risk of further escalation. I personally expect another round of escalation.
The current positioning reflects optimism, but not the underlying reality. The geopolitical situation remains highly fragile, and the probability of another escalation phase is still elevated.
The US administration appears increasingly constrained. Following the previously communicated 48-hour deadline, the situation has evolved into a delicate balancing act, with limited room to maneuver without losing credibility.
At the same time, signs pointing towards a potential increase in military involvement, including the possibility of ground troop deployment, are rising. This would mark a significant step up in escalation.
From a market perspective, this creates an asymmetric risk profile:
A renewed spike in oil prices remains highly likely
Equity markets would come under pressure
Bond yields could move higher again, implying losses for bond investors
The behavior of precious metals remains less straightforward in the short term. Recent weakness suggests that forced selling, potentially from emerging market central banks needing liquidity or defending currencies, has played a role. Should this pressure ease, the structural safe-haven demand could reassert itself.
What remains critical:
Markets are still driven by headlines, not fundamentals.
Positioning based on hope rather than confirmed developments carries elevated risk. Direction can shift rapidly, and often abruptly, with each new headline.
Conclusion:
Avoid chasing current market moves. The risk-reward profile at this stage does not justify aggressive positioning.
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