The IDF has reported a fourth wave of missiles from Iran aimed at Israel, even as calls for a ceasefire grow. However, the markets remain stable, showing little reaction to the rising tensions in the Middle East. Last week, markets appeared eager to move past the unrest in the region. Former President Trump’s decision for U.S. intervention did not lead to major changes, especially since Iran’s response has not been severe. This hints at a possible easing of tensions. For the markets, the focus is on reducing conflict. Although attacks continue, as long as the situation does not escalate further, market reactions are not expected to change significantly. This situation resembles the ongoing conflict between Russia and Ukraine, which is still active. Such conflicts often serve as checkpoints for both the media and the markets, which quickly move on from the initial shock. Globally, attention shifts quickly as new stories emerge. The markets’ reactions to geopolitical tensions may soon fade as other news takes precedence, reflecting the rapid pace of news cycles and economic interests worldwide. Despite recent missile exchanges, asset prices, especially in speculative markets, have shown little reaction. Volatility indicators across most indices hardly moved. This detachment suggests that market participants believe the issues will remain contained. Instead of reacting impulsively to every development, there’s a growing sense of cautious complacency. We see patterns similar to past geopolitical turmoil, where initial alarm turns into indifference if disruptions don’t affect trade routes, energy supplies, or financial systems. With the broader conflict not showing signs of expanding regionally, there’s no indication of significant disruptions to oil flows or supply chains. After minor fluctuations, Brent crude prices have stabilized. The outcomes from last week’s monetary policy meeting also gave traders a reason to overlook the headlines. Powell’s team indicated that interest rates might remain steady for a while, focusing more on supporting stable financial conditions rather than addressing inflation directly. This reduces the need for major adjustments in bonds or equity-related assets. From our perspective, stories that don’t have a direct economic impact tend to fade from traders’ consciousness. This doesn’t underestimate current events, but it highlights that markets look ahead. They quickly absorb public concern and adapt if the situation doesn’t affect key areas—liquidity, credit conditions, or earnings performance. While analysis desks continue to urge caution in hedging, few are changing their main forecasts this week. In options markets, demand for protection against downside risks is present but not significantly high. This gap between concern and action indicates stability rather than a calm before a storm. We find it more useful to monitor trading volume than headlines. When fighting intensified, there was a surge in index put options, but those have since rolled off or been adjusted upward. This behavior suggests that traders are opting for short-term hedges instead of long-lasting bearish outlooks. In the upcoming sessions, derivatives positioning will likely focus on key earnings announcements and inflation reports. Although geopolitical tensions continue, there are no new developments pushing significant budget or policy changes, meaning that market positioning will rely more on local economic data than global conflict. In commodities, interest in safe havens has cooled. Last Wednesday, gold lost some momentum, and open interest in near-term futures contracts decreased. There’s no sign that large institutions are adjusting their collateral portfolios in response to international developments. Keep an eye on the bond market for any signs of price adjustments. Recent auction results indicate steady demand, with ten-year yields remaining relatively stable, influenced more by supply expectations and domestic policy outlook than geopolitical concerns. While aggression continues, market participation shows selective sensitivity. Across various sectors, traders are treating political unrest as a background issue rather than a catalyst for sweeping corrections. As new macroeconomic data comes in, focus will likely shift back to inflation, wage growth, and earnings season—elements that feed more into options volatility and positioning than missile launches reported in the news.

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