Markets are entering the week with a heightened sense of caution, as investors weigh the potential for further geopolitical escalation. Volatility is set to pick up, with oil prices increasingly sensitive to the risk backdrop.

 

Bitcoin has slipped below $100,000, equity futures are falling, and gold is climbing—signs that the flight to safety is in full swing. Until we see signs of de-escalation, this defensive positioning, particularly around oil, will likely continue, according to Josh Gilbert, Market Analyst at eToro.

 

Gilbert remarks: That said, this kind of uncertainty is quickly becoming the new normal for markets, so I expect to see a relative sense of calm unless we see tensions keep rising, which, to be clear, it has the potential to do.

 

Oil is front and centre this week. Should retaliation target key oil infrastructure or disrupt shipping lanes, we could see oil continue to move higher in the short term. The key risk remains any disruption to the Strait of Hormuz, a vital artery for global oil supply and a strategic corridor for the UAE and the broader Gulf. While oil flows have continued uninterrupted so far, even the threat of closure could rattle energy markets.

 

As a major energy powerhouse, the UAE has a lot riding on oil market stability. But unless there’s a material escalation, oil may struggle to hold recent gains—especially as OPEC+ continues to unwind its voluntary supply cuts.

 

For equity investors, the key risk isn’t just geopolitics—it’s what higher oil prices mean for inflation and rate expectations. That’s where the longer-term concern lies. We’ll see some key economic data this week, including inflation readings from Australia and the US, global growth signals, and commentary from central banks—all of which could interact with oil’s price moves.

 

So even without an immediate fallout, the mix of oil volatility and renewed uncertainty is likely to be enough to keep risk appetite subdued. The problem for investors is that right now, oil-driven uncertainty is dominating the narrative. -TradeArabia News Service