Changes in the Pricing Logic of Financial Markets After the Middle East Conflict

So far, the Middle East conflict has lasted for four weeks. Both sides have moved from a state of confrontation into a phase of making contact via third parties. With the market facing the unpredictability and nonlinear evolution of the geopolitical conflict, it is showing a distinct headline effect—pricing logic has also switched, in stages, from a long-narrative phase to the immediacy, overshoot behavior, and reversibility of reactions to news headlines. Cross-market liquidity transfer speeds have increased. In the 25 trading days up to March 27, the S&P 500 index rose on only 7 days; the Korean Composite Index rose on 11 days (with 1 day closed for trading). The 10-year U.S. Treasury note rose on only 6 days (with yield declines corresponding to price increases). International gold prices also rose on only 6 days. Brent crude oil futures prices rose on 16 days, while the U.S. dollar index rose on 13 days.

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