Geopolitical Tensions Spark 1% Market Decline, Gold Up 30%

Geopolitical tensions have escalated significantly, with the U.S. strikes on Iran and Iran's retaliatory threats to close the Strait of Hormuz, a critical route for global oil trade. This has led to a ~1% market decline and heightened volatility, as investors grapple with the potential disruption to oil supplies and the broader economic implications. The situation has been further complicated by the ongoing Israel-Iran conflict, which has seen Israeli military strikes on targets in and around Tehran. This conflict has driven up gold prices by about 30% this year, as investors seek safe-haven assets. However, despite the missile strike exchange between Iran and Israel, safe-haven flows did not control financial market activity. Investors sold precious metals to offset losses elsewhere due to global selloffs sparked by the growing Middle East war.

Bitcoin, which had fallen below the $100,000 mark last week, retested this level this morning, indicating that the weekend pullback was more driven by macro factors. Investors viewed crypto assets as a safe haven during the opening of stock index futures. Due to low market liquidity, price fluctuations were amplified, with the overall market liquidation amount exceeding $1 billion. Although Iran has vowed to take retaliatory measures, the market does not currently seem to believe that the situation will escalate significantly. Geopolitical "behind-the-scenes mediation" appears to be playing a moderating role. While the skew of put options remains high until September, the strong rebound in spot prices and the compression of front-end volatility indicate that investors do not currently view this as a systemic risk event.

This market sentiment is also reflected in traditional assets. US stock futures, crude oil, and gold initially reacted to the news but quickly retreated to Friday's levels. This indicates that investors are interpreting the current situation more as a regional conflict rather than a global crisis. However, after experiencing concentrated liquidation of leveraged long positions, Bitcoin is still consolidating around $100,000. This makes the next few trading days particularly crucial. Amid ongoing geopolitical uncertainty, digital assets are at a crossroads between "risk appetite recovery" and "defensive hedging."

The U.S. Federal Reserve has maintained a cautious, data-dependent stance and held interest rates unchanged last week. However, President Donald Trump has restated his demands that interest rates be lowered by 2.5 percentage points by the U.S. Federal Reserve. This has added to the uncertainty in the market, as investors are waiting for clarity on the Fed's next moves. The escalating geopolitical situation has also led to a focus on key economic data and earnings reports. The NATO summit and other critical events are set to shape markets this week. The future trend of the market faces a key test as investors navigate through these uncertainties. The market decline signals geopolitical tensions, and while short-term volatility is likely to persist, long-term investors should remain focused on fundamentals and selectively explore value in the current correction.