U.S.-Iran war enters third week; market enters second phase of pricing

Author: ChainThink

This war, now in its third week, can no longer be simply understood as Trump’s swift decapitation strike. It has evolved into a complex conflict intertwining Middle Eastern geopolitics, energy transportation, U.S. political constraints, global risk appetite, and cross-asset pricing. While there are no signs of an imminent end to the conflict, markets have already moved from the “first wave of panic pricing” into a second phase characterized by “trading while fighting, and diverging as tensions escalate.”

What should be the key focus for the next turning point in the conflict? And how did global assets change over these three weeks, revealing what kind of global capital allocation strategy?

The conflict escalated on February 28, with the United States and Israel launching sustained, high-intensity strikes against Iranian targets, followed by Iran's retaliation against Israel and regional targets. The front line gradually expanded from domestic military sites to energy infrastructure, Gulf security, and regional proxy networks.

Timeline梳理

Late February to early March: The war officially entered a full-scale escalation phase.

The U.S. and Israel launched sustained, high-intensity strikes on Iranian targets, prompting Iran to respond with a coordinated retaliation. The nature of the conflict has shifted from “high-pressure standoff” to “sustained hot war.” The market’s initial reaction priced this as a potentially brief but intense regional conflict: crude oil and gold rose, while the U.S. dollar and Treasuries were sought after, and equities and cryptocurrencies came under pressure.

Around March 3: The outside world began to realize that the war would not end soon.

BBC has begun discussing "where this war is headed"; by early March, global public opinion and markets had already moved beyond viewing it as a blitzkrieg ending in a few days, and instead began reassessing the war's boundaries, objectives, and duration.

March 8–10: Legitimacy of the war, U.S. public opinion, and spillover effects enter the center of discussion

After entering the second week, the war was no longer just a military news story but began to shift into political and macroeconomic issues: external skepticism about the war’s legitimacy grew, divisions emerged within the U.S. over whether to become further involved, and markets transitioned from pricing in “event shocks” to pricing in “persistent variables.”

March 13–15: Front expands, risks on the periphery of the Gulf rise significantly

Mid-March was a critical turning point. BBC reports show that countries such as Saudi Arabia, the UAE, and Kuwait have also begun reporting attacks; the conflict is no longer limited to Iran and Israel targeting each other but is beginning to spill over into the entire Gulf security framework.

March 18–19: Energy facilities and refineries targeted; war enters the energy disruption phase

In recent days, the conflict has clearly escalated. Iran has identified Israel as responsible for the attacks on gas fields and expanded its targets to include energy facilities in Qatar and Saudi Arabia; Israeli refineries have also been attacked. At this stage, market focus has shifted from "who is gaining the upper hand" to "whether the energy supply chain will be disrupted."

- March 20: The market began trading the longer-tail macroeconomic consequences

At this point, the war in Iran is prompting the market to reassess a more hawkish interest rate path. This means the impact of the conflict has moved beyond geopolitics itself, transmitting to oil prices, inflation, interest rates, the dollar, and global risk asset valuations. The market is now not just fearing the war, but actively trading its secondary consequences.

1. Crude Oil: Shifting from event-driven momentum to supply risk premium

Crude oil is the most direct asset in this conflict. Initially, it was an emotional shock, but it has since shifted to a reassessment of supply chain risks. As long as keywords like the Strait of Hormuz, Gulf oil and gas facilities, and tanker security remain prominent, oil prices will struggle to return to purely fundamentals-based pricing. Crude oil is no longer just a “war beneficiary”—it has become the engine driving overall market inflation expectations.

2. Gold: Transitioning from safe-haven buying to medium- to long-term allocation

It is not new for gold to benefit from war, but what is different this time is that gold is not just being bought short-term by traders—it resembles a long-term reallocation of global capital to increase geopolitical risk exposure. In other words, gold’s strength does not necessarily mean tomorrow will be more dangerous, but it signals that capital is beginning to acknowledge: over the coming period, the probability of black swan events has increased.

3. USD and U.S. Treasuries: Short-term beneficiaries, but no longer a "blind long" trade

In the early stages of war, the U.S. dollar and U.S. Treasuries are typically the most natural safe-haven destinations. However, if high oil prices persist and U.S. inflation rebounds, leading to a delay in Fed rate cuts, the dollar may remain strong, but long-duration Treasuries may not fare as well. Reuters notes that “the war has prompted markets to reconsider a more hawkish interest rate path,” indicating that capital flows have shifted from “safe-haven bond buying” to “safe-haven dollar buying, with greater caution toward bond duration.”

4. Stocks: First, cut valuations, then shift the structure.

The equity market initially declined broadly, but then began to diverge: sectors with high energy consumption, reliance on global supply chains, and sensitivity to interest rates came under pressure, while energy, defense, and certain cash-flow-stable assets performed relatively better. The market isn’t incapable of rising—rather, the rally will become more narrowly focused, shifting from broad risk-on sentiment to selective defensive positioning and thematic trading.

5. Cryptographic assets: Returning to their roots as risk assets, then attempting to reclaim the narrative of alternative safe havens

This war once again proves that, most of the time, Bitcoin still trades as a risk asset in the short term. At the outset of hostilities, BTC struggles to immediately attract pure safe-haven buying like gold; instead, it is more likely to decline first due to liquidity contraction and deleveraging. However, as the market gradually stabilizes, BTC reclaims its narrative as an alternative asset in an era of sovereign credit uncertainty. In other words:

Initial reaction: First decline, following risk assets in deleveraging

- Second reaction: If fiat currency credibility, fiscal pressures, and energy shocks intensify, BTC may once again be reconsidered as a hedge tool.

From a capital flow perspective, BTC is not a gold substitute but rather a highly volatile macroeconomic liquidity barometer. The shorter the war, the more it behaves like a risk asset; only when the conflict drags on and shifts toward inflation and credit concerns does it have a chance to reclaim part of its “digital gold” pricing power.

Next, the most critical things to watch are the following four items:

Will the energy infrastructure continue to be targeted?

This is the top priority. As refineries, gas fields, oil ports, and tanker routes continue to be targeted, oil prices will maintain a high risk premium, forcing global assets to be repriced.

2. Have there been any material changes in the Strait of Hormuz or maritime insurance?

What truly impacts global markets are not verbal threats, but actual disruptions in transportation, soaring insurance premiums, and rerouted shipping routes. These directly affect crude oil, chemicals, inflation expectations, and global supply chains.

3. Will the United States shift its focus from "suppressing" to "restructuring"?

Reuters noted that U.S. and Israeli war objectives are not entirely aligned. This is extremely important. If the U.S. continues to limit escalation, the market will interpret the conflict as a "controllable high-intensity conflict"; but if U.S. policy objectives shift, the market will begin pricing in more extreme tail risks.

4. The extent of internal pressure in Iran and whether its regional proxies will further coordinate

If the conflict drags on, economic, financial, and social pressures within Iran will intensify rapidly; at the same time, if more regional actors become involved, the war will no longer be a bilateral conflict but will spread across multiple nodes. At that point, markets will shift entirely from “event trading” to “regional crisis trading.”

The conflict has moved from an "emotional shock" to a "structural repricing." Bitcoin was initially sold off as a risk asset at the start of the war but later demonstrated its inflation-hedging safe-haven properties. In the future, attention should be paid to whether it will regain its allocation value against a backdrop of prolonged credit uncertainty.