## Global Markets Brace for Geopolitical Tensions
Last week's reports of conflict between Iran and Israel sent shockwaves through global markets. Analysts predict that geopolitical developments will continue to influence the trajectory of global stocks and commodities in the coming days.
Meanwhile, the US House has stepped up its support for Ukraine, approving a $60.8 billion aid package that includes replenishing US-made weapons and ammunition. Additionally, a separate bill providing $17 billion in direct military aid for Israel and over $9 billion in humanitarian aid for Gaza and other war-impacted regions has also been approved.
Should tensions between Iran and Israel escalate, analysts warn of potential panic selling and increased volatility across global stock markets. The Indian market, in particular, will be closely monitoring fluctuations in crude oil prices, as geopolitical events often impact them.
However, UBS analysts advise investors to avoid panicking and exiting the stock market even if tensions escalate. While volatility is expected, they believe such choppy movements will be short-lived.
Drawing on historical data, UBS notes that the S&P 500 index has recovered within a year of crisis two-thirds of the time since the attack on Pearl Harbor in 1941. In half of those instances, recovery occurred within a month.
Instead of exiting the market, UBS suggests alternative strategies to improve portfolio resilience and participate in potential rebounds. These include long positions in Brent crude oil as a hedge against further escalation, allocations to gold and US Treasuries for protection against adverse outcomes, and structured strategies for exposure to potential gains while reducing sensitivity to corrections.
UBS also recommends macro hedge funds, which can capitalize on interest rate cycle changes and navigate geopolitical shifts. Additionally, systematic allocation strategies can provide risk management by adjusting portfolio equity allocation in response to changing economic and market trends.
On the technical front, the Nifty 50 index has held onto its 100-day moving average (DMA) and recovered from lows of 21,777. Analysts suggest 22,300 and 22,525 as the next hurdles, with 21,700 (100-DMA) as the next support level if the index falls below 22,000.
The Nifty Bank index also displayed strength, recovering from lows of 46,500 and closing above its 50 and 100-DMA. The next hurdles are 48,200 and 48,700, with 46,000 as the next support level if the index falls below 46,500.
The long exposure of FIIs in index futures stands at 35%, while the put-call ratio sits at 1.03, indicating a bullish bias.