James Brodie
Head of Learning & Development, Flux
Bonds Collapse, Equities & Precious Metals Plummet
Global markets panic: equities, metals fall, yields surge as Iran conflict escalates, supply fears rise and financial stress builds.
Monday opens with another wave of selling: Kospi -6.5%, Nikkei -3.9%, gold -7.1%, silver -7.9%, S&P futures -1.1%, while 2-year yields rise 8bp - all following heavy moves on Friday.
The S&P 500 has now broken key support, and with stops likely to trigger, markets are finally waking up to the scale of supply destruction and geopolitical escalation. This has all the hallmarks of a full-blown risk-off event, dare I say, panic.
Friday’s moves set the tone: S&P -1.6%, Nasdaq -1.9%, with yields surging (2Y +11bp, 10Y +14bp), while precious metals reversed sharply (gold -3.4%, silver -6.8%). (Chart 1, S&P 500 breaks support & 200 dma, Bloomberg)
The cross-asset signal is clear. Equities are now moving in lockstep with bond volatility. (Chart 2, S&P 500 versus Bond Move Index (volatility))
Bond markets continue to break down, with yields moving sharply higher and further upside risk ahead. (Chart 3, US 2-year yield, Bloomberg)
Positioning is driving the move. Hedge funds are aggressively de-risking, with reports of major UK funds suffering significant losses on BOE OIS trades. The market has swung from pricing 53bp of cuts to +99bp of hikes by year-end. (Chart 4, Bank of England OIS, Bloomberg)
Over the weekend, geopolitical risks escalated further:
- US preparing for potential ground operations in Iran
- Trump signals possible de-escalation, then threatens to “obliterate” Iranian power plants
- Iran responds with threats to fully close the Strait of Hormuz and strike critical infrastructure
- Israel calls for broader international involvement
- Iraq declares force majeure on key oilfields
- Qatar confirms energy production will not resume until conflict ends
- Fuel shortages emerging globally, with rationing and supply disruptions spreading
At the same time, the real supply shock has yet to fully hit - cargoes already in transit are masking the true scale of disruption. That changes in the coming days.
Financial stress is building rapidly:
- Dubai real estate down 60% in 3 weeks
- Gold funds see near-record outflows
- Dealers globally operating under margin pressure
The market is now transitioning from repricing to panic.
CONCLUSION: MARKETS ARE IN PANIC MODE - AND THE REAL ENERGY SHOCK HAS YET TO FULLY HIT.
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