Trump Vows More Iran Strikes; Oil Soars | Horizons Middle East & Africa 4/2/2026
Speakers
Summary
- President Trump's national address dashed hopes for de-escalation, stating military operations against Iran will continue for "two to three weeks" and threatened to attack Iranian electrical infrastructure, offering no clear strategy for reopening the Strait of Hormuz.
- Markets reacted negatively in a risk-off move: MSCI Asia-Pacific down 2.1%, S&P futures down 1.2%, South Korea's KOSPI down over 4%, Brent crude oil surged ~6% to nearly $107/barrel, and the US dollar strengthened as a safe haven.
- Deepak Mehra argues the current energy shock is fundamentally different from 2022 due to higher baseline interest rates; it will act as a tax on consumers, leading to a severe economic slowdown rather than an inflationary spike, and he still expects the Fed to cut rates at least once this year.
- Mehra also contends the U.S. is the primary safe haven across asset classes (USD, Treasuries, equities); if the war persists, flows will continue toward these U.S. assets.
- Luis Costa notes emerging markets face a stagflationary squeeze from higher oil and potential growth drags; he does not expect oil to return to pre-conflict levels, forecasting a residual geopolitical premium keeping Brent between $85-$100.
- Costa highlights specific pressure on commodity currencies like the South African rand, where terms of trade have fallen over 25% since the conflict began, forcing investors to reassess fair value.
- Meir Javedanfar analyzes that Trump wants to end the war quickly to limit global economic damage but needs a tangible win, such as reopening the Strait of Hormuz or securing Iranian nuclear concessions, while Iran's economy is suffering from difficulties repatriating oil revenue.
- The aviation sector is experiencing severe disruption: jet fuel costs have doubled, leading airlines like United to cut capacity by 5% and Vietnamese carriers by up to 30%, with fare increases of up to 30% to offset costs.
- Mozambique's early repayment of its IMF loan is seen as a signal of financial independence but may drain foreign reserves and does not guarantee a smooth path to a new IMF program.
- Netanyahu claimed Israeli/U.S. strikes have eliminated Iran's nuclear and ballistic missile capabilities, though Javedanfar clarified the nuclear threat was already neutralized in June 2025.
Trade Ideas
Speaker stated the U.S. dollar has been the "safe haven of choice" and that the U.S. overall has appeared as a safe haven across asset classes. If the Iran war drags on, increased risk aversion will drive more capital flows toward traditional safe havens, with the U.S. dollar being the primary beneficiary. Long USD as a tactical safe haven play during ongoing geopolitical uncertainty and market volatility. A swift resolution to the war or aggressive rate cuts by the Fed could undermine the dollar's strength.
Speaker noted U.S. Treasuries have outperformed other government bonds and are part of the U.S. safe haven complex. Persistent conflict will intensify flight-to-quality flows, benefiting U.S. Treasuries as a core safe asset. Long U.S. Treasuries to capture capital appreciation and defensive positioning amid risk-off sentiment. An abrupt end to the war or a reacceleration of inflation forcing the Fed to hold rates could reduce demand.
Speaker stated U.S. equities have been a relative safe haven compared to European and emerging market equities, and that "U.S. dollar Treasuries and equities will benefit" if the war continues. Ongoing geopolitical stress and the U.S.'s relative energy independence and economic resilience will attract equity flows away from more vulnerable regions. Long U.S. equities as a defensive equity allocation within a risk-off environment, anticipating relative outperformance. A severe U.S. economic slowdown triggered by the energy shock could outweigh safe haven benefits and hit corporate earnings.
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