Analysts highlight selective buying opportunities, volatility risks, and a renewed focus on quality assets.
Dubai: A fragile ceasefire in the US-Israel-Iran conflict is giving investors a brief window to reassess positions, with analysts pointing to a more selective and cautious approach rather than broad risk-taking.
While the temporary truce has eased immediate fears around oil supply disruptions and regional escalation, markets remain highly sensitive to headlines, prompting investors to focus on quality assets, selective buying opportunities, and protection against renewed volatility.
Market behaviour in recent days reflects a reset in sentiment, with investors balancing easing geopolitical tensions against ongoing concerns over inflation, interest rates, and stretched valuation levels.
A pause, not a turning point
Hamza Dweik, Head of Trading MENA at Saxo Bank, said the ceasefire should be seen as a period of adjustment rather than a signal for aggressive repositioning.
“The ceasefire offers investors a period of breathing space rather than a signal to materially change strategy,” he said.
Investor sentiment across the region remains constructive, but it is increasingly tempered by concerns over valuation risks. That balance is driving a more disciplined approach to asset allocation, with investors focusing on long-term structural themes rather than reacting to short-term market swings.
Dweik said investors are becoming more selective, with attention shifting toward sectors linked to global growth and clearer demand visibility, including infrastructure, logistics, and technology.
He added that interest in artificial intelligence remains strong, although concerns about elevated pricing are just as prominent—reinforcing a preference for quality exposure over momentum-driven trades.
Selective buying opportunities emerge
Recent market moves suggest investors are looking to position around oversold assets, particularly in sectors that were hit hardest during the recent escalation.
Neal Keane, Head of Global Sales Trading at ADSS, said, “Investors can look to buy oversold high-quality assets. A trend toward a ceasefire and a longer-term peace deal is likely to trigger a sharp rally in global stock markets.”
Equity markets have already recovered much of their earlier losses, with major US indices moving back close to flat for the year after the declines seen in late March.
Keane added that the travel, leisure, and technology sectors could attract renewed investor interest, along with financials, especially if oil prices stabilise and inflation pressures begin to ease.
“Airlines, travel companies, banking, and financials are likely to see major upside if and when oil prices normalise,” he said.
Volatility remains a defining feature
Despite the pause in conflict, market conditions continue to be shaped by rapid headline-driven shifts, limiting visibility on market direction.
Ahmad Assiri, Research Strategist at Pepperstone, said, “The current market backdrop is less about a clean directional trend and more about a headline-driven volatility regime.”
Price movements are increasingly linked to geopolitical developments, with short-term catalysts driving sharp intraday swings.
He added that opportunities are emerging in sectors that had already priced in worst-case scenarios, including real estate and logistics, although positioning must account for sudden shifts in market sentiment.
“This is a market regime where optionality has value due to the high sentiment fluctuation linked to headlines,” Assiri said.
Caution on inflation and rates
The ceasefire has not removed underlying macroeconomic pressures, with inflation and interest rate expectations continuing to shape investor decisions.
Keane said the recent spike in oil prices has brought inflation back into focus, adding that markets now see less than a 20% chance of a US rate cut by December.
He said, “The current ceasefire is temporary, and there is a real risk of re-escalation, continued supply chain disruption, and another spike in oil prices.”
Higher energy prices could delay monetary easing and even raise the possibility of further tightening, creating a more complex environment for risk assets.
Diversification over concentration
The current phase is reinforcing a broader shift toward diversification, with investors spreading exposure across sectors and regions to better manage uncertainty.
Dweik said nearly eight in ten investors in the region are reassessing valuation levels, reflecting growing caution around crowded trades and stretched pricing.
He added that portfolios are being adjusted with a stronger focus on resilience, balancing exposure to long-term growth themes with disciplined risk management strategies.
