Washington, United States. The escalating war in the Middle East has led investors to reassess popular 2026 trades, with global equities slumping, the dollar rising and traders scaling back bets on Federal Reserve rate cuts.
Growth positioning disrupted
ING head of global markets Chris Turner said investors had been positioning for growth and that a stagflationary shock “was not part of the plan.” He added that investors were acting cautiously and “would still have more to unwind.”
Bearish dollar bets reverse
Investors had held their largest bearish bet on the dollar since 2021 as recently as last month, according to weekly data from the US markets regulator, reflecting limited incentive to buy the currency amid expectations of Federal Reserve rate cuts.
After the start of the conflict, the dollar reached its strongest level since last November, indicating a rush to safety.
Dollar seen benefiting from resilience to energy shocks
“The US dollar emerges as the biggest winner of the Middle East conflict,” said Ipek Ozkardeskaya, senior analyst at Swissquote. She said the US economy was likely to be more resilient to energy shocks.
Jean-François Robin, head of global research at Natixis CIB, said the US is now a net energy exporter and imports 17 per cent of its needs, a 40-year low.
Global equities slide from early-2026 consensus
Global equities, which began 2026 supported by a broad “buy equities” consensus, have slid sharply.
How are you adjusting your investment strategy amid the market volatility caused by the Middle East war?