Svmuu News: Pepperstone strategist Dilin Wu stated that the failure of the US and Iran to reach an agreement has firmly rooted uncertainty. In the very short term, a stronger US dollar accompanied by a slight decline in US Treasury yields is a fairly reasonable pricing outcome. After the initial shock from the news subsides, the reaction of US Treasuries may become more complex. Short-term yields may still decline slightly due to safe-haven demand, but if oil prices continue to rise, they will quickly re-anchor higher inflation expectations, thereby creating new upward pressure on long-term yields. It is also highly likely that the energy and defense sectors will outperform the broader market on Monday, with a noticeable upward gap at the open.
The energy sector is the most direct beneficiary of supply-side contraction, while the defense sector reflects the rise in geopolitical risk premiums and their more persistent nature. However, the magnitude of the market movement will depend on two key factors—the sustainability of the strength in oil prices, and whether the market confirms this as a lasting supply shock rather than merely a temporary, sentiment-driven reaction. (Jin10)