The global financial markets were just hit by a highly aggressive wave of correction. Geopolitical tensions that initially centered in eastern europe have now quickly spread to the middle east, triggering mass panic among large institutions and retail traders alike. Two major pieces of bad news hit market sentiment back to back in a very short time.
First, the prolonged war between Russia and Ukraine escalated further this week with massive airstrikes targeting vital infrastructure in kyiv, followed by retaliatory ukrainian drone strikes on russian oil logistics facilities. Before the world could even digest the economic impact of that tension, a much more instant trigger emerged. On the sidelines of the NATO summit, president donald trump issued a harsh statement declaring that the ceasefire agreement with Iran is over, launching an open threat to heavily strike their vital targets tonight.
This new threat of war targeting the middle east immediately received a negative response from the market. Within just the first 5 minutes of the US stock market opening bell, $500 billion vanished from the stock market. Massive panic selling happened everywhere due to fears of a shutdown in the strait of hormuz the world’s main oil transit route which could send energy prices skyrocketing and trigger a new round of hyperinflation.
This impact instantly created a domino effect across the globe. Before the US market even opened, asian stock markets were already battered by this bad sentiment. Market data showed that japan's nikkei index closed down sharply by -2.11% at 66,819.05, while the broader topix fell 1.4% to 4,006.43, wiping out roughly ¥19.4 trillion or $120 billion in market value.
An even more brutal situation hit the South Korean stock market, where the kospi index plunged by -5.35% to close at 7,246.80, wiping out an estimated ₩366 trillion or $243 billion. Combined, Japan and Korea lost roughly $363 billion in stock market value in a single day.
My Opinion
As fellow traders, seeing the market bleeding red like this is definitely a test for our psychology. However, if we break it down logically using a macro lens, this situation is a clear example of a hyper risk off phenomenon. The market's biggest fear right now is not isolated wars, but an integrated escalation where the western bloc (US NATO) directly faces the eastern bloc (Russia Iran) considering Iran is one of the main military logistics suppliers for Russia in the Ukraine war.
When two of the world's largest energy producing regions (Russia in Eastern Europe and Iran in the Middle East) face open conflict risks at the same time, big institutions automatically move to protect their capital. They liquidate high risk assets like stocks and crypto immediately, moving their money into safe haven assets like gold or the US dollar.
Even though we see some giant tech stocks trying to hold the line or bounce slightly due to quarterly earnings reports, the overall market map still shows heavy red dominance. This is a big alarm for us not to rush into catching the falling knife or buying the dip blindly without clear confirmation of the market structure.
In conclusion, this high volatility is expected to stick around this week as long as global military rhetoric does not cool down. Let's stay disciplined with our risk management, tighten our stop losses, and remember that during such crazy market conditions, protecting our capital or holding cash is often the best trading position we can take.
Source
Posted Using INLEO
