QUESTION:
With markets responding to heightened Middle East tensions, which asset classes offer the most opportunity for defensive positioning or strategic rotation?
RESPONSE:
In light of the heightened tensions in the Middle East, certain asset classes are seeing increased interest as investors seek defensive positioning or strategic rotation. Notably, safe-haven assets such as gold have been climbing due to the rising geopolitical risks. Gold recently topped a one-month high as investors moved towards safe-haven assets in response to the spike in hostilities in the Middle East[1][2].
Additionally, oil prices have surged due to the geopolitical factors, specifically the escalating tensions in the Middle East, which are unsettling markets and pushing prices higher[3]. This suggests that energy-related assets might also be of interest, although they come with their own risks given the volatility in the region.
Moreover, the broader market reaction includes a retreat in Wall Street and global markets, indicating that investors are cautious and possibly reallocating towards less risky assets[4]. Therefore, gold and potentially other commodities or defensive stocks could offer opportunities for strategic rotation in this environment.
References
[1] Gold tops 1-month high as Middle East tensions spur safe-haven demand [CNBC]
“This latest spike in hostilities in the Middle East has taken the focus off trade negotiations for now, with investors making a play towards safe-haven assets in response,” said Tim Waterer, chief market analyst at KCM Trade.
[2] Gold climbs on rising Middle East tensions, weaker dollar [CNBC]
Rising geopolitical risks aided safe-haven assets, with President Donald Trump announcing on Wednesday that U.S. personnel were being moved out of the Middle East due to heightened security risks amid rising tensions with Iran.
https://www.cnbc.com/2025/06/12/gold-climbs-on-rising-middle-east-tensions-weaker-dollar.html
[3] What’s Fueling Oil Prices? Geopolitics, Not Growth [Forbes]
Rather, it is geopolitical factors—specifically, escalating tensions in the Middle East—that are unsettling markets and pushing prices higher.
[4] Oil prices surge, Wall Street and global markets retreat after Israel’s strike on Iran
“An Israeli attack on Iran poses a top ten of our global risk, but Asian markets are expected to recover quickly as they have relatively limited exposure to the conflict and growing ties to unaffected Saudi Arabia and the UAE,” said Xu Tiachen of The Economist Intelligence.