New Delhi, March 4. Escalating tensions in the Middle East, fueled by conflicts involving the United States, Israel, and Iran, are set to drive sharp gains in safe-haven assets like gold, the US dollar, and the Japanese yen. A fresh report released Wednesday highlights this trend amid growing geopolitical risks.
DBS Bank’s latest analysis warns that sovereign and corporate bond spreads could widen significantly as investors flock to safer options. Short-term monetary policies are expected to remain steady, providing little relief in the near term.
Chief Economist Taimur Baig emphasized the latent threats from Iran’s naval capabilities. Even without direct warship confrontations, the potential for mine-laying in the Strait of Hormuz could disrupt shipping lanes, spike insurance premiums, shipping costs, and energy prices worldwide.
“With Kurds in the north and Baloch in the south, regime change wars could align with conditions ending current conflicts, pulling in multiple nations from Turkey to Iraq,” Baig cautioned. Prolonged closure of the Hormuz Strait would devastate global oil trade, as most Gulf producers rely on this vital chokepoint.
In a full-blown crisis, the report notes, even US strategic petroleum reserves might prove insufficient to offset supply shocks. Extreme scenarios could propel crude oil prices to $100-150 per barrel, reigniting inflation fears, constraining the Federal Reserve’s rate-cut options, and heightening global recession risks.
DBS dismisses silver as a viable alternative to gold for portfolio diversification. “We disagree that silver serves as a gold substitute, given 60% of its demand stems from industrial uses and its smaller market size,” the report states. Investors should brace for volatility as safe havens shine amid uncertainty.