Mark Mobius: four questions about the war in the Middle East that investors care about

Veteran investor Mark Mobius believes markets can adapt to any conflict as long as it remains predictable. But right now, he believes investors are putting the scenario of a short U.S.-Israeli campaign against Iran into their forecasts and ignoring the possibility that it could drag on. In a new blog post on his Substack blog and in an interview with Financial News, Mobius attempted to answer four questions facing the markets.

Although volatility has increased, the market is not showing signs of panic, Mobius notes. "Investors appear to be pricing in a scenario in which military targets are limited and the U.S. avoids a protracted ground conflict," he says. Historically, markets have tended to stabilize once the scale and likely duration of a military operation becomes clearer, the investor says.

Mobius points out that the energy market is at risk directly from the closure of the Strait of Hormuz to Middle East oil and LNG tankers. "This 'hub' accounts for a significant share of global oil exports, and even temporary disruptions could have a disproportionate impact on prices," he emphasizes.

The key variable remains the U.S. ability to neutralize Iran's maritime capabilities: if military objectives are achieved, the likelihood of a prolonged blockade of the strait disappears, although Tehran's geographic location gives it leverage for asymmetric pressure.

Iran's strikes on civilian targets in Dubai and Abu Dhabi are cited by Mobius as a factor that will have significant political repercussions. "These attacks are likely to further strain Iran's already fragile relations with the Gulf states," he notes. Even if the physical damage is minor, Iran's diplomatic isolation could have a long-term effect on the balance of power in the region and alter traditional alliances.

Mobius believes the main threat is the uncertainty of timing. "Markets can absorb the effects of conflict. They find it much harder to deal with unpredictability," he summarizes. If the US-Israeli operation lasts longer than initially expected, the impact on the market will be much more severe, as current prices do not account for an open ended war scenario.

At the same time, Mobius himself says the standoff in the Middle East could continue for at least another two to three weeks.

Mobius' comments came amid a campaign by the U.S. and Israel to destroy Iran's military infrastructure. In response, Iran has used missiles and drones against Israel, US facilities in the region and its allies, shelling at least nine countries. The escalation has already led to a spike in Brent crude oil prices, a strengthening dollar and a rise in the Wall Street Volatility Index.

This article was AI-translated and verified by a human editor