Explosions Echo Throughout the City! Witnessing History on Monday

Source: Wall Street Intelligence Circle

Weekend headlines were dominated by explosions.

The United States and Israel launched strikes on multiple Iranian targets, and Iran responded swiftly with greater force and speed than its retaliation to Israel's airstrike last June.

Now, what investors care about most is what will happen in the financial markets on Monday.

First, what the market really needs to assess is how to "define" the conflict. The financial market's reaction to geopolitical conflict essentially falls into three scenarios: surgical strikes (short-term shock), regional escalation (rising energy risks), and energy shock crisis (secondary inflation spike).

Trump claimed that Iran's Supreme Leader Khamenei had died—this might lead the market to believe this conflict is just a "precise operation" rather than a protracted war, and only faces short-term volatility.

Iran's announcement of closing the Strait of Hormuz is a variable; about 20% of the world's oil passes through here. This would be an extreme move that could trigger regional escalation. Iran has never truly taken such an action, and for the global market, it remains a nightmarish scenario ("psychological shock" outweighs the actual impact).

Second, there are three important indicators to watch at Monday's open:

· Crude oil: Oil prices are the most closely watched. Some analysts believe Brent crude may surge to the $100 mark at open. If it jumps about 5%, everything is under control; if it surges around 8%, inflation trades will restart; if it rises more than 10%, it could trigger panic in risk assets (when oil prices rise, everything else falls). For every 10% increase in oil prices, the US dollar may rise by about 0.5%-1%.

· US Treasuries: If yields fall, safe-haven dominates; if yields rise, inflation dominates.

· US stock futures: Performance in the first hour after the open—there is a high probability of a drop due to lack of buying support, but the real trend will emerge after the first hour of trading.

Third, global markets already began pricing in a "war scenario" in the last two hours of trading on Friday, with gold, crude oil, and the US dollar all rising together.

This operation may have been brewing for months, as Trump hasn't talked about oil prices for a long time. Moreover, after two consecutive days of declines in US stocks on Thursday and Friday, neither Trump nor the US Treasury took any action to calm the market because they knew what was coming. But Trump will try to minimize the impact on oil prices, and his choice to act on Saturday proves this—giving the market a day to buffer on Sunday. He will strive to control the "intensity" of the conflict rather than pursue full-scale war.