News of Iran’s attack on Bahrain has put the Middle East on edge again. Looking back over the past few decades, whenever something happens in the Middle East, the market’s first reaction is to sell off, then slowly figure out whether it’s a localized clash or a genuine escalation. The rhythm this time will probably be much the same. Most people are watching oil and gold for a breakout, but I think they’ll dip first. History shows that when emotions peak, it often isn’t a real turning point. What about you?

Zoom out a bit, and this “sell first, sort it out later” rhythm is nothing new. After the Soleimani incident in early January 2020, Brent crude briefly surged more than 4% intraday, and gold quickly spiked as well. But within a few trading days, oil had given back most of its gains. Only then did the market reassess whether the conflict would prompt a symbolic response or a sustained escalation. When Saudi Aramco’s facilities were attacked in September 2019, Brent crude briefly gained nearly 15% in a single day, an unusually sharp intraday surge by the standards of recent years. Yet within a few weeks, prices had gradually fallen back toward their pre-incident range, showing that the first wave of sentiment-driven pricing often moves faster than the facts. Look, too, at the early days of the Israel–Hamas conflict in October 2023: after a brief jump, oil didn’t keep breaking higher in a straight line, while safe-haven buying in gold followed a “surge first, then fluctuate, then reassess” pattern. The same was true during the exchange of attacks between Iran and Israel in April 2024. Brent crude fell back after spiking, and within days the market shifted from fears of “full-scale escalation” to an assessment of “limited retaliation.” These cases aren’t necessarily identical, but they share a clear pattern: when news breaks in the Middle East, the first wave of trading is often driven by emotion—it triggers volatility first, then prices adjust as more information comes in.

So the news of Iran’s attack on Bahrain will probably trigger another initial flight to safety: oil could be bought up first, gold could see a rush of buying, and risk assets could come under pressure. Then the market will try to distinguish the scale and targets of the attack, the casualties, the statements that follow, and whether a third party is mediating. Most people are watching oil and gold for a breakout, but I think they’ll dip first—not that they won’t rise, but the initial spike could easily be followed by a pullback, or even an initial sentiment-driven sell-off. History shows that when emotions peak, it often isn’t a real turning point. The true direction usually becomes clearer only after the first round of statements, the second round of responses, and slower-moving data such as shipping, inventories, and insurance costs come in. What about you?