The United States attacked Iran’s key nuclear facilities last weekend, and investors are concerned about whether Iran will retaliate. Although Asia-Pacific stock markets generally fell on Monday, the wait-and-see atmosphere was strong, limiting the decline of Asian stocks.
The International Monetary Fund (IMF) warned that global economic growth will be further hit in an already uncertain environment.
Investors are worried about whether Iran will retaliate against the United States. Asia-Pacific stock markets and foreign exchange markets generally weakened on Monday (June 23), and the MSCI index tracking global emerging market stocks fell 0.7%.
Taiwan’s stock market led the decline in the Asia-Pacific market, closing down 1.42%, Seoul fell 0.24%, and Singapore’s stock market fell 0.11% throughout the day; Hong Kong, Shenzhen and Shanghai stock markets bucked the trend, with Hong Kong up 0.67%, Shenzhen and Shanghai stock markets up 0.43% and 0.65% respectively.
Hu Yuxuan, an investment analyst at Phillip Securities Research, said in an interview with Lianhe Zaobao that market participants believe that the US military action is a controlled event and there is little risk that the conflict between Israel and Iran will spread beyond the region. Investors’ wait-and-see attitude toward Iran’s retaliatory actions may also limit the market’s decline.
“This is different from the tariff war, which has a wide impact on global trade, supply chains and corporate profits, causing large market fluctuations,” he said.
In contrast, the totalitarian policies enacted by US President Trump on tariffs far exceeded people’s expectations and lacked a clear strategy, thus scaring off investors, said Wang Jiankai, Asian equity market strategist at investment research firm Morningstar.
“It is unlikely that the Israeli-Iran conflict will weaken oil flows, and the reaction to rising oil prices will be short-lived. We do not expect the market to react significantly to energy restrictions,” said Wang Jiankai.
IMF President: Economic growth of major countries may be affected
On the other hand, IMF Managing Director Kristalina Georgieva warned that at a time of increasing global uncertainty, US military actions may have broader impacts, not limited to energy.
She said in an interview with Bloomberg TV on Monday (June 23) that the biggest impact at present is energy prices, but there may also be secondary and tertiary effects. For example, if there are more turbulences that hit the growth prospects of large economies, it will trigger the possibility of a downward revision of the global growth outlook.
She said: “When there are uncertainties, investors do not invest and consumers do not consume, which will in turn suppress the prospects for economic growth.”
The rapid escalation of geopolitical tensions has also prompted the US dollar to re-play the role of a safe haven, but the relatively mild trend shows that investors are still cautious about buying the US dollar across the board.
As of 5:15 pm on Monday, the US dollar rose 1.15% against the Japanese yen, 0.4% against the Singapore dollar, and 0.47% against the euro.
Hu Yuxuan believes that investors have always sought the US dollar as a safe haven when geopolitical uncertainty increases, but the US dollar has fallen 8.7% so far this year, and its safe haven status is being increasingly questioned, so the US dollar will not strengthen for a long time.
He pointed out that Trump’s tariffs disrupt global trade relations and weaken the network power that supports the dominance of the US dollar. In addition, Trump’s use of the US dollar as a coercive tool to prompt other countries to achieve de-dollarization through alternative assets such as gold and other currencies will weaken market confidence in the US dollar.