LIVE MARKETS-Three variables Allianz GI is watching amid Middle East conflict
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THREE VARIABLES ALLIANZ GI IS WATCHING AMID MIDDLE EAST CONFLICT
Allianz Global Investors' chief economist Christian Schulz is eyeing three main variables in the week ahead, as the unfolding situation in the Middle East hangs over markets.
"The next days will determine whether markets price a stabilisation or escalate toward higher risk regimes," he wrote in a note.
Firstly, any evidence of unrest or protest in Iran would increase uncertainty and prolong elevated energy prices.
Allianz thinks oil prices will likely rise even if a sustained closure of the Strait of Hormuz remains unlikely for now.
The second variable is Iran's response beyond Israel.
"Signs of continued disruption in the Gulf – directly or via proxies – would immediately lift oil and LNG risk premium in broader financial markets," he writes.
Finally, Schulz is watching out for any signals from global actors.
"Any political or logistical support, tacit or explicit, from Russia or China would shift the probabilities toward a broader geopolitical confrontation."
As for market moves, Schulz says equities may see a sharp but potentially short‑lived sell-off.
"Normally, US Treasuries and the US dollar should rise, but their path is less clear compared to past episodes of geopolitical strife, given the changing role of the dollar," he wrote.
(Lucy Raitano)
EARLIER ON LIVE MARKETS:
MIDDLE EAST CONFLICT: WHAT IT MEANS FOR THE BOE, ECB CLICK HERE
HOLD YOUR NERVES - BARCLAYS CLICK HERE
STOXX SHUDDERS AS IRAN CONFLICT LIFTS OIL, SINKS TRAVEL CLICK HERE
BEFORE THE BELL: EUROPE'S FUTURES DOWN SHARPLY; DEFENCE, AIRLINES, OIL STOCKS ON THE RADAR CLICK HERE
DIRE STRAITS FOR GLOBAL OIL TRADE CLICK HERE
