Geopolitical shocks often do not move markets in the way intuition suggests; investors typically "collect liquidity first and ask questions later." For investors who understand this phenomenon, it is not a problem, but rather an opportunity.
اضافة اعلان
In the four days following the initial U.S.-Israeli strikes on Iran, gold fell by approximately 4%, and European defense stocks followed suit. This seems counterintuitive. Historically, gold has been a safe haven during turmoil, and conflict usually drives demand for military equipment.
The explanation lies in investor positioning—or more specifically, "crowded trades."
Liquidity Over Logic
When a major market-shaking event occurs, many fund managers execute "programmatic trading," which is a rapid, automated reduction of risk to raise cash. Instead of selling selectively, they aim to raise a specific percentage of liquidity by cutting a fixed portion of all their holdings. Consequently, the positions that have risen the most are sold the most.
When this behavior is amplified across the entire market, it explains why assets that should logically benefit from a shock can end up falling the fastest.
Clearing the Crowd: The Case of Gold
Gold has been the clearest example of this in recent weeks. According to BlackRock data, a record amount of capital flowed into Exchange-Traded Products (ETPs) in 2025. Of the $100 billion added, $83 billion went into gold products. An additional $15.5 billion flowed in during January alone—the largest monthly inflow since September.
Furthermore, Bank of America data showed that gold was trading nearly 30% above its 200-day moving average just before the Middle East conflict began—the most extreme level for any major financial asset. In short, gold was a very "crowded trade." This is why it retreated when conflict erupted, despite its reputation as a safe haven.
The same applies to European defense companies. The sector index had outperformed the European market by more than threefold over the past 12 months. For instance, Germany’s Rheinmetall has surged about 1,700% since 2022. When this sector weakened immediately after the war began, it was clearly driven by crowded positioning rather than fundamentals.
What’s Next?
Risk reduction is the easy part of a crisis; the harder question is what to do next. Investors must ask: Is the world fundamentally the same—in which case original positions can be restored—or does it look significantly different?
Defense & Gold: Given ongoing geopolitical fragmentation, the investment case for European defense remains strong. For gold, miners are poised for record cash flows while trading below historical valuation averages.
South Korean Chip Stocks: These were among the biggest gainers early in the year, driven by AI hardware demand. They fell not because the war changed their fundamentals, but because they were in a high-risk zone with inflated prices (trading 40% above their 200-day moving average).
Oil Opportunities: In some cases, a crisis shifts fundamentals. Iran’s closure of the Strait of Hormuz pushed Brent crude above $100 per barrel. However, oil producers' share prices have not kept pace with this rise, creating a potential "value gap."
Conclusion
Navigating such markets requires bold decisions to de-risk and re-leverage. It demands the ability to distinguish between a genuine shift in fundamentals and technical rebalancing.
