Markets may yet react to Iran war

David Solomon, chief executive of Goldman Sachs, said he was surprised by the markets’ muted reaction to the Middle East conflict.

He said that, given the scale of events, more significant shocks could have been expected. So far, however, investors have reacted quite mildly. He believes markets need a few more weeks to fully assess the short- and long-term consequences of the conflict.

Tensions are already driving up oil prices, fuelling concerns over inflation. At the same time, global stock indices are slipping as investors move capital into safer assets such as the US dollar. So far, declines on Wall Street have remained relatively mild.

Solomon also said the US economy is currently being helped by a combination of favourable macroeconomic factors, including monetary policy easing. However, he did not rule out the economy growing faster than expected this year, which could increase inflationary pressures again.

(reuters, mja)