Global stocks have clawed back losses triggered by the Iran conflict, with major indexes now trading at or above pre-war levels, as investors rapidly unwind geopolitical risk hedges and refocus on the artificial intelligence boom, said market watchers.
The MSCI World Index, which measures the performance of over 1,000 large and mid-cap equities from developed markets, fell 3.29% in the immediate week following the outbreak of the Middle East war. In recent days, however, it has hit a fresh record high and is now almost 2% above its March 2 level, the first trading day after the conflict began.
The sharp rebound has surprised some market watchers because the conflict remains unresolved and a fragile ceasefire faces looming deadlines.
“The rebound has been driven by a rapid unwind of the war-risk premium that was sitting across equities, oil, and the dollar at the peak of the conflict, rather than a fundamental reset,” said Billy Leung, investment strategist at Global X ETFs.
He added that once ceasefire prospects emerged, “positioning that had been defensively tilted for weeks reversed quickly, and that repositioning has done most of the heavy lifting.”
