London, United Kingdom, March 05, 2026 (GLOBE NEWSWIRE) — Global financial markets have entered a highly sensitive state surrounding the escalation of US and Israeli military action against Iran. Energy price volatility has increased, safe-haven assets have strengthened, and intraday volatility in US stocks has intensified significantly. David Whitcombe, Head of Market Strategy at LINK FOREX, pointed out in a recent internal meeting: “The war itself is not the determining variable for the market; what truly determines the trend is whether the war changes profitability, liquidity, and the cost of capital.” He emphasized that the market is currently repricing for “uncertainty,” rather than betting on “certain outcomes.”
Phase One: Emotional Shock and Rising Risk Premiums
Historically, geopolitical military conflicts typically trigger three types of market reactions immediately: First, oil prices rise rapidly. Due to the instability of energy supply expectations, this is the most direct impact path. Second, VIX volatility surges. Due to increased demand for risk hedging, funds contract in the short term. Finally, overvalued assets come under pressure. Growth stocks and technology stocks are usually the first to adjust during periods of declining risk appetite.
David Whitcombe points out, “This phase is emotion-driven, and its duration typically depends on the speed of conflict escalation and market transparency.”
Phase Two: Reassessment of Inflation Expectations and Interest Rate Path
If the conflict persists, market focus will shift from “the event itself” to “whether energy prices will establish a trend of upward movement.”
David Whitcombe notes that if oil prices remain high for an extended period, this will lead to increased inflation expectations. As inflation expectations rise, the Fed’s policy path will be repriced. If interest rates rise, this will increase pressure on valuation compression. “What truly affects the medium-term trend of US stocks is not the missiles themselves, but the oil price curve.” Currently, the market has not yet formed a definite expectation of a long-term energy supply disruption.
Phase Three: Will Corporate Earnings Be Damaged?
David Whitcombe emphasizes that to determine whether a trend has reversed, it is essential to observe whether corporate earnings expectations have undergone a systemic downward revision.
Key indicators to watch include: S&P 500 EPS expectations for the next 12 months, changes in corporate profit margins, and whether capital expenditure plans have been delayed. “If the earnings curve doesn’t break down, the long-term structure of the US stock market is generally not rewritten by a single geopolitical event.”
