Asia Markets to Open Risk-Off as Middle East Tensions Mount: Comments from Saxo Bank

Asia open: risk-off first, then differentiate

• Asian markets are likely to reopen with a risk-off tone, with pressure most visible in airline, cyclicals and trade-exposed sectors.
• Energy, mining and defense stocks—including companies involved in drone technology, which has been widely deployed in this conflict—could show relative resilience.
• Traditional defensives such as utilities, consumer staples and healthcare may hold up better than the broader market, but they are not immune if the selloff is driven by higher oil prices and inflation concerns.
• Asia and EM also face a dual shock of higher oil prices which tend to be an inflation/tax effect and a broader pullback in risk appetite.

Oil: upside more likely to be sticky

• Oil prices are likely to open higher / gap higher and the move may not fade quickly because the market is not only pricing barrels, but also pricing the cost of moving barrels.
• Even without a full shutdown, higher war-risk premia, rerouting and insurance repricing can keep crude and freight costs elevated.
• With the entire Gulf region impacted, unwinding this geopolitical risk premium may take time, particularly given the region’s central role in global energy supply.
• There is also a clear incentive for Iran to leverage energy markets for creating economic pressure, because energy is the fastest transmission channel into global inflation and sentiment.

What sustained higher oil means for inflation — and the Fed path

• If higher oil prices persist, it raises the risk of stickier headline inflation and can slow the pace at which inflation prints improve.
• That does not automatically mean policy tightening, but it can make the Fed more cautious about cutting quickly, because energy-driven inflation can spill into expectations and broader pricing behaviour over time.
• The result is a higher bar for a clean “dovish pivot” if oil stays bid.

Sector lens: who typically benefits vs. who feels the pain

• Relative beneficiaries: Energy and defense/security exposures—particularly drones/counter-drone—if risk premia rise and security spending expectations build.
• Most impacted: Airlines, airports, travel & leisure (fuel and demand shock); shipping/logistics and global trade-exposed names (war-risk insurance, rerouting, delays); and oil-sensitive importers across Asia/EM where higher energy costs squeeze margins and consumers.

Gold: the clean hedge as uncertainty rises

• Gold tends to do well when investors want an asset that is less dependent on earnings visibility, supply chains, or any single region’s political risk.
• It can also serve as a policy-plus-inflation hedge in an environment where energy risks complicate the macro path—creating “double support” for gold and, to a degree, other precious metals.
• Silver can see bigger upside in a risk-off bid because it typically carries more beta than gold: it can rally harder when safe-haven demand and inflation hedging rise, but it also tends to be more volatile on the way there.
• Safe-haven demand can lift both the US dollar and gold — it’s not either/or. In a geopolitical shock, gold can trade as “insurance” even if the dollar is firm, which is the classic decoupling.

Scenarios from here

• Best case: Rapid de-escalation and limited disruption to flows; equities can stabilise and retrace, but oil may still hold above pre-event levels as insurance and security costs take time to normalise.
• Worst case: If Iran feels backed into a corner, the risk is escalation becomes more likely and less predictable, with meaningful disruption around key shipping lanes; oil and freight/insurance costs rise further, risk-off deepens, and inflation risks become more persistent—reducing central banks’ flexibility and extending volatility globally.

Bigger picture: fundamentals return, but the regime has changed

• Once volatility settles, markets are likely to go back to focusing on earnings, cash flows and fundamentals.
• But this episode is another reminder that the global economy is fragmenting, and “strategic sectors” matter more in portfolio construction.
• Gold, defense and other security-linked enablers are increasingly becoming essential building blocks as geopolitical risk becomes more frequent rather than exceptional.
• In that environment, active management matters — because the winners and losers can rotate quickly as the map changes.