Markets Still Want to Buy the Dip—But the Margin for Error Is Shrinking

Edmond de Rothschild argues that despite geopolitical volatility, investors continue to treat the Iran shock as tradable rather than structural.

• Risk assets rebounded quickly after signs of delayed escalation, reinforcing the market’s tendency to fade geopolitical panic unless supply disruption becomes durable.
• Central banks have turned more hawkish as energy prices feed inflation concerns, with markets now pushing back expectations for rate cuts.
• Credit spreads widened and equity leadership narrowed, with energy and materials outperforming while rate-sensitive sectors came under pressure.

If the conflict drags on, the issue may no longer be volatility itself—but whether markets are still underpricing macro damage.