Morwenna Coniam

The speaker stated that markets are starting to price in a protracted Middle East conflict, focusing on growth implications rather than inflation, leading to sovereign debt rising across regions. Rising energy prices from the conflict are expected to harm economic growth, which reduces the inclination for central banks to maintain a hawkish stance, making bonds more attractive as safe-haven assets and on expectations of lower interest rates. This implies a bullish outlook for sovereign bonds as investors seek safety and anticipate a more dovish monetary policy environment. If upcoming inflation data (e.g., Eurozone inflation for March) comes in hotter than expected, it could remind markets of persistent inflation risks and reverse the bond rally.

Gold is up more than 2%. The Dollar Index (DXY) is rising against almost every currency, including traditional havens like the Yen and Swiss Franc. Investors are bypassing Treasuries (yields rising) due to inflation fears from the oil spike. Therefore, the only "true" safe havens remaining are Gold (hard asset) and the US Dollar (liquidity king). LONG. In a "stagflationary shock" scenario (war + inflation), Gold and USD tend to outperform bonds. If the conflict is contained quickly, the "fear bid" evaporates.