Ceasefire resets markets, investors eye selective bets and risks

Dubai: A fragile ceasefire in the US-Israel-Iran conflict is giving investors a brief window to reassess positions, with analysts pointing to a more selective and cautious approach.

Market behaviour in recent days reflects a reset in sentiment, where investors are weighing easing geopolitical pressure against persistent concerns around inflation, interest rates and valuation levels.

A pause, not a turning point

Hamza Dweik, Head of Trading MENA at Saxo Bank, said the ceasefire should be viewed as a period of adjustment instead of a signal to reposition aggressively.

“The ceasefire offers investors a period of breathing space rather than a signal to materially change strategy,” he said.

Investor sentiment across the region remains constructive, though tempered by growing awareness of valuation risks. That balance is shaping a more disciplined approach to asset allocation, with a focus on long-term themes over short-term reactions.

Dweik said investors are becoming more selective, with attention moving toward sectors tied to global growth and demand visibility, including infrastructure, logistics and technology.

He added that interest in artificial intelligence remains strong, though concerns around pricing are equally prominent, pointing to a preference for quality exposure over momentum-driven trades.

Selective buying opportunities emerge

Recent market moves suggest that investors are looking to position around oversold assets, particularly in sectors that were hit hardest during the escalation.

Neal Keane, Head of Global Sales Trading at ADSS, said, “Investors can look to buy oversold high-quality assets, a trend towards ceasefire and a longer-term peace deal is likely to see a sharp rally in global stock markets.”

Equity markets have already recovered much of their earlier losses, with major US indices returning close to flat for the year after declines seen in late March.

Keane noted that travel, leisure and technology sectors could see renewed interest, along with financials, if oil prices stabilise and inflation pressures ease.

“Airlines, travel companies, banking and financials are likely to see major upside if and when oil prices normalise,” he said.

Volatility remains a defining feature

Despite the pause in conflict, market conditions continue to be shaped by rapid shifts in headlines, limiting visibility on direction.

Ahmad Assiri, Research Strategist at Pepperstone, said, “The current market backdrop is less about a clean directional trend and more about a headline driven volatility regime.”

Price movements are increasingly tied to geopolitical updates, with short-term catalysts driving intraday swings.

He added that opportunities are emerging in sectors that had priced in worst-case scenarios, including real estate and logistics, though positioning needs to account for sudden changes in sentiment.

“This is a market regime where optionality has value due to the high sentiment fluctuation linked to headlines,” Assiri said.

Caution on inflation and rates

The ceasefire has not removed underlying macro pressures, with inflation and interest rate expectations continuing to influence investor decisions.

Keane said the recent spike in oil prices has brought inflation back into focus, adding that markets now see less than a 20% chance of a US rate cut by December.

He said, “The current ceasefire is temporary and there is a real risk of re-escalation, continued supply chain disruption, and another spike in oil prices.”

Higher energy prices could delay monetary easing and introduce the possibility of further tightening, creating a more complex backdrop for risk assets.

Diversification over concentration

The current phase is reinforcing a broader shift toward diversification, with investors spreading exposure across sectors and regions to manage uncertainty.

Dweik said nearly eight in ten investors in the region are reassessing valuation levels, pointing to caution around crowded trades and stretched pricing.

He added that portfolios are being adjusted with a focus on resilience, combining exposure to growth themes with risk management strategies.