In the summer of 2019, an unexpected position emerged by the US President (at the time and now) Donald Trump when the last minute stopped an American military strike against Iran, despite the great escalation after Tehran shot down a US drone.
Despite the official justifications that talked about “keenness on lives”, many analysts linked Trump’s frequency to a fundamental economic factor, which is his keenness to maintain the momentum of American stock markets, which were achieving historical gains at the time.
Trump, and still saw at the rises of American stock prices, was one of his most prominent achievements, which made him not ready to risk undermining the confidence of investors by entering into an open war that may confuse the markets, and strike the stability of the American economy, which was soon, was reeling due to protectionist policies and exaggerated customs definitions, which Trump announced his intention to impose, which it seems that Netanyahu has decided to ignore him.
Wall Street sees the war between Iran and Israel from a different perspective from media and political coverage, while talking in public focuses on military conflict and geopolitical tensions, financial markets view the event from the angle of direct influence on oil, risks to the movement of capital, and the degree of potential turmoil in global supply chains.
Wall Street investors do not deal with the war as just a political event, but rather as a specific factor for price trends, liquidity transformations, and new opportunities or risks that appear in global markets.
With the outbreak of any confrontation between two forces of this size and influence, it was the first reactions in the energy markets, especially the oil market, as Iran is one of the major oil producers, and it is actually controlling the Strait of Hormuz, from which a huge percentage of Gulf exports passes to the world.
Any threat to closing the strait – and if temporary or indirect – pushes oil prices to rise sharply, which has already been translated into rapid movements in New York and Chicago power exchanges.
At the same time, the escalation against Israel has disrupted gas exports from maritime fields to Europe and other destinations, adding more pressure on the energy markets that have already suffered from fragility since the Russian invasion of Ukrainian territory began more than three years ago.
Oil prices do not represent the only problem for Street, as wars are customary to cause general turmoil in emerging markets, and an accelerated exit of capital from them towards what is known as “safe havens” such as: the dollar, American bonds, and gold.
This behavior raises the demand for American assets, and leads to a decline in the currencies and markets of the countries neighboring Iran and Israel, such as: Turkey and Egypt, and the Gulf states, which is monitored by the American investment funds and financial institutions.
In any case, the geopolitical risks push investors to give more caution, forcing them to redistribute the financial portfolios, to move away from the volatile markets.
The other thing that worries Wall Street is the breadth of the conflict. If the war remains confined to mutual attacks between Iran and Israel, or it stops completely- as Trump announced on Monday- the markets will gradually absorb the shock.
But if the conflict extends to include Iran’s allies in Lebanon, Iraq, Yemen, or carriers in the Red Sea, which cannot be completely excluded, then the situation is getting dangerous.
Insurance companies will raise their prices on oil and goods shipments, which increases the costs of international trade, reduce the profits of companies, or raise inflation rates in most of the world’s economies.
The shares of marine and insurance companies will immediately be affected by such transformations, so the traders of Wall Street move quickly based on their evaluation of the risk size and extent of their sustainability.
Wall Street also watched the American reaction closely, and after the direct intervention of the United States in the war, the balance of power has definitely changed, and the financial accounts of the White House changed, especially in light of the great deficit in the American budget.
Any additional American military participation may lead to increased defense spending, which may be welcomed by the military industries sector, but at the same time it raises fears of the widening public debt and high interest rates, which will have negative effects on economic growth, and then on stock markets.
As for the technology sector, it may be the least affected by the war, but it will not remain immune from it, as the expected cyber attacks between Iran and Israel may disrupt some financial or technical services, and the digital infrastructure may become an arena for confrontation.
Wall Street continues these possibilities, especially since the companies listed on the Nasdaq Stock Exchange depends largely on cyber stability, and any widespread threat in this field may cause shocks in the shares of highly sensitive technology companies for geopolitical disorders.
In parallel with these risks, Wall Street is not without the mentality of speculation over crises, as there will always be the one who sees in the war an opportunity to profit, whether by betting on the high oil prices, or buying shares of defense companies (unacceptable from a legal point of view), or even investing in gold and digital currencies as alternative assets.
Therefore, it is expected that all markets will not always move in one direction, but rather fluctuating in a way that reflects a mixture of fear and greed, as is the case in any major crisis.
The decisive factor remains in the Wall Street evaluation of the war is “time”. The longer the struggle, the more economic repercussions, the greater and widening, and the hedge funds and investment banks pushed to amend their strategies in the medium term, which would have turned anxiety into a wide correction wave in global markets.
As for the war has already ended and the international powers were able to quickly contain the escalation, the markets have absorbed the effects of the strike, and returned to its previous track, contented with some temporary changes that will not cause significant disturbance in the longest term.
Despite all of the above, it cannot be asserted that the economic factor was alone behind Trump’s endeavor to contain the crisis and announce a quick ceasefire, as there were great pressure from international powers, including China and Europe, to avoid more chaos in the region.
Determine balances also played an important role, as everyone realizes that the open war will be expensive and uninterrupted. However, it is certain that the economy was a pivotal factor in reducing the appetite of war, as both America and Israel realize that the war cannot be funded without a stable economy, and cannot be gained under a fragile financial system.
As her dealings with all major events, Wall Street did not look at the war between Iran and Israel from a moral or political perspective, but rather read it in the language of numbers and possibilities, and sought to determine who is harmed and who benefits, using cold accounts in a world that ignites events, in which capital is always moved towards what seems safe or profitable, even if it is behind the clouds of war.
The opinions in the article do not necessarily reflect the editorial position of Al -Jazeera.