What Iran means for Markets

When markets open tonight, they'll be trading winners and losers from this war

Markets don’t care if something’s right or wrong. They just want to make money. That’s what’ll happen tonight when markets open. There’ll be no navel-gazing on whether US attacks on Iran are justified or if this might escalate into something bigger and more destabilizing. There’ll only be one question on everyone’s mind, which is how markets will move and how best to get ahead of that.

This post previews what I think will be price action tonight and in coming days. We know three things. First, there’s a good chance oil prices will spike and markets will differentiate between winners and losers. Oil exporting countries will get bid up. Oil importers will get sold. After Russia invaded Ukraine in Feb. 2022, the Brazilian Real became the world’s best performing currency as markets recognized it for being a big commodity exporter. I expect the same to happen now. Second, we know markets look at trade exposures to see what knock-on effects any shock might have. Iran is a small economy, but - at the margin - anyone with a big export exposure will get hit. Turkey looks vulnerable in this regard. Third, the “debasement trade” has two basic drivers: (i) out-of-control fiscal policy, which has markets looking for any kind of safe haven from debt monetization; and (ii) geopolitical risk, which is why reciprocal tariffs in Apr. ‘25 or the January fisticuffs over Greenland pushed up gold prices. There’s no doubt that war in Iran will push up precious metals and safe haven currencies still further.

I’ll now discuss each of these three things in turn:

• What to learn from Russia’s invasion of Ukraine: the chart below shows how markets moved in Q1 2022 when Russia invaded Ukraine. The blue bars show how the world’s major currencies moved against the Dollar from the end of Dec. ‘21 to the end of Mar. ‘22. If a bar is positive, it means the currency rose against the Dollar. If it’s negative, it fell. I start my window before the actual invasion in February as markets priced invasion well ahead of Russian troops crossing the border. The red bars show what happened to global oil prices (CO1), gold (XAU) and the S&P 500 (SPX). Brazil’s Real (BRL) rose a stunning 18 percent, leading a group of commodity exporters that includes South Africa (ZAR), Chile (CLP), Colombia (COP) and Mexico (MXN). Markets clearly bid up commodity exporters across Latin America and elsewhere. I expect this to be similar now. I also think markets will zero in on Turkey (TRY), India (INR), Japan (JPY) and South Korea (KRW) as big energy importers. These currencies will get sold. The only thing that’ll be different now is the Russian Ruble, which won’t fall, since higher oil prices are - in this instance - good news for Russia.

• Trade exposures suggest added vulnerability for Turkey: the chart below uses IMF direction of trade data to look at from which countries Iran imports the most. In descending order, the five biggest exporters to Iran are the UAE (a logistics hub in the region through which lots of trade is routed), China, Turkey, the EU and India. Iran is a tiny economy, but - at the margin - markets will see this as another reason to be negative on Turkey.

• Geopolitical uncertainty will drive precious metals higher: I’ve posted lots about out-of-control fiscal policy as a driver of the “debasement trade,” but geopolitical uncertainty is another big driver. The chart below shows the XAU/$ gold price from Bloomberg, which rose sharply after reciprocal tariffs were unveiled in April 2025 and again in January during the fisticuffs over Greenland. Precious metals will take off again when trading resumes tonight, as will safe haven currencies.

Of course, there’s a million unknowns, but - at a broad brush - this is what I expect markets to price when trading resumes tonight.