Goldman Sachs warned in a note on Friday that an easing of geopolitical tensions would likely reverse some of the recent market moves and allow equity markets to outperform again while the U.S. dollar eases. The bank said the outcome for macro markets hinges on how long the current energy disruption lasts and how investors reassess growth and inflation dynamics.
Analyst Kamakshya Trivedi told investors that macro markets are coping with what she described as "too much inflation, too little growth" as participants evaluate the consequences of the Iran conflict and the potential persistence of the energy shock. That dynamic, the bank said, underpins investor behavior across asset classes.
Goldman Sachs cautioned that "central bank pricing has overshot most modal upside estimates of what is warranted," a judgment tied to market fears of what the note called "potentially the largest energy supply shock since the 1970s." The bank highlighted that interest-rate markets have absorbed the sharpest repricing so far, reflecting those inflation and energy concerns.
By contrast, Goldman said moves have been smaller across equities, credit and currencies, with market participants drawing a distinction between energy exporters and importers. That differentiation has moderated some cross-asset reactions, the bank noted.
The firm identified a key risk: if disruptions at the Strait of Hormuz become prolonged and force markets to worry about "severe growth downside," the result would be additional pressure on equities and emerging markets and a further bid for the dollar as investors shift toward safe-haven assets. In the bank's words, that scenario "would put more outright pressure on equities and EM… and boost the Dollar further."
However, Goldman emphasized that the reverse scenario is also possible. "If a swifter de-escalation can be achieved, in line with recent optimism, some of those prior themes of global equity outperformance and Dollar weakness should resume and may even be reinforced by recent events," the note concluded.
In short, Goldman Sachs frames the near-term outlook as contingent on geopolitical developments: prolonged disruption would favor safer assets and weigh on risk assets, while a quick de-escalation would likely restore conditions supportive of equities and a softer dollar.