Market Intelligence Brief: Markets Settle Into the Conflict as the Initial Shock Is Priced In

 

March 11, 2026 - Day twelve of the US-Israeli offensive against Iran finds markets in a cautious stabilisation phase, with indices broadly steadying, crude oil volatility subsiding, and cautious confidence returning to the sidelines

12 days into a military conflict that briefly sent oil toward $120 and knocked indices sharply from their highs, markets are doing something that might have seemed improbable a week ago: settling. The extraordinary volatility of the initial shock phase has subsided. Crude oil, which swung from near $120 to around $90 within a single session earlier this week, has found a more stable footing. Indices around the world appear to be returning to something resembling an upward trajectory, even if the pace and conviction of that recovery is measured rather than emphatic. The investors who retreated to the sidelines in the opening days of the conflict are cautiously returning, not because resolution is in sight, but because the initial shock has been priced in. The conflict, for now, appears to be developing in a one-sided direction.

 

How Markets Absorb Geopolitical Shocks

The current phase of market behaviour illustrates a pattern that repeats across geopolitical events: the initial shock is violent, the uncertainty premium is large, and then, as the conflict's contours become more defined, markets begin to reprice based on what they know rather than what they fear. The first days of the Iran conflict were characterised by maximum uncertainty about scope, duration, the Strait of Hormuz, and Iran's response capability. Each of those uncertainties carried a risk premium that pushed assets in predictable directions.

Twelve days in, those uncertainties have not been resolved, but they have been partially defined. Iran appears to be launching fewer drone strikes, which can be read as a signal of diminishing weapons stockpiles and a shift in tactical approach. The move to attempt mine-laying in the Strait of Hormuz, which was countered swiftly by the US Navy sinking sixteen mine-laying vessels, underscores the extent to which the conflict is currently running in one direction. A military engagement this asymmetric in character tends to be read differently by markets than one in which both sides possess and deploy comparable capabilities. The asymmetry suggests a ceiling on Iran's ability to escalate, in turn limiting the geopolitical risk premium.

None of this amounts to certainty. The conflict continues, the Strait of Hormuz situation requires ongoing monitoring, and any single development could rapidly alter the picture. But the general acceptance that the initial shock has now been priced in represents a meaningful change in market psychology from the opening days of March.

 

US Futures: Stabilising, But the Prior Range Feels Distant

US indices are fractionally mixed this morning, the Dow up a nominal 0.02%, the Nasdaq 100 marginally lower by 0.01%, and the S&P 500 a thin 0.05% higher. The near-flat readings capture the essence of the current market mood: neither a recovery rally with genuine conviction nor a resumption of conflict-driven selling, but a cautious equilibrium as participants wait for clearer signals.

The Dow's technical picture remains informative. The trading range that characterised the first two months of the year still sits at levels that feel distant from where the index is trading now. The journey from those early-February highs has been prolonged and multi-causal, combining the AI earnings reassessment, the technology rotation, tariff anxieties, and twelve days of geopolitical conflict. A former support level that now potentially acts as resistance sits above current prices, meaning the path back to the year's prior range is not simply a matter of recovering lost ground; it requires breaking through a technical barrier that was once a floor and may now function as a ceiling.

That said, investor confidence throughout 2026 has been generally constructive, and there is a credible case that, once the conflict concludes, investor sentiment will be constructive. The geopolitical overlay is removed, and markets will revert to assessing the fundamental picture on their own terms. What that picture looks like, whether the AI investment story retains its momentum, whether earnings can sustain current valuations, and whether tariff impacts prove manageable, will determine the eventual direction of recovery.

 

European Equities: A Marginal Pullback Within a Steadying Picture

 

European indices are marginally softer this morning, with Germany 40 down 0.73% and the UK 100 lower by 0.54%. The pullback, given the context of the past twelve days, should be read as consolidation within a broadly steadying picture rather than any fresh deterioration. The DAX continues to sit within its yearly trading range; the initial impact of the conflict has, to a meaningful extent, been absorbed.

Germany's index has shown remarkable resilience amid a conflict that, given Germany's structural energy dependence and trade exposure, might have been expected to cause more lasting damage. The fact that the DAX is back within the range that prevailed before the conflict is partly a function of how swiftly the asymmetric nature of the military engagement became apparent. A conflict in which one side rapidly loses the ability to escalate is priced differently from one in which both parties have substantial and deployable military capability.

Investor caution is nonetheless warranted. The qualification that things could change at the drop of a hat is not rhetorical; it reflects the genuine and ongoing uncertainty that accompanies any active military conflict, regardless of how one-sided the current balance of forces appears. The stabilisation of the past few days does not guarantee continuity. Markets that have priced in the initial shock retain their sensitivity to any development that suggests the shock has not, in fact, been fully absorbed.

 

EURUSD at a Long-Term Support Line: The Currency Market's Watching Brief

 

The foreign exchange market is providing one of the more analytically interesting pictures of the morning. EURUSD is fractionally higher at plus 0.05%, hovering at a support level that has held, for the most part, since June of last year. The level's longevity makes it significant: a support line that has survived multiple rounds of geopolitical stress, tariff uncertainty, and divergent economic data carries more structural weight than one that formed in recent weeks.

The context around EURUSD is genuinely complex. The pair has been navigating the simultaneous influence of the Ukraine-Russia conflict, higher oil prices, EU-US tariff tensions, and the Iranian military situation. Each of those forces has, at various points, applied downward pressure on the euro and upward pressure on the dollar's safe-haven premium. The fact that EURUSD is sitting at a long-term support level that has held through all of those pressures raises a genuine question: has the dollar's safe-haven status for this particular cycle of risks now run its course?

The next directional move from here is genuinely difficult to predict. A break below the long-term support would signal that the cumulative weight of geopolitical and economic pressures has overcome the structural demand for euros at that level, with potentially significant implications for the euro's trajectory. A bounce from the support, particularly if accompanied by de-escalation signals or improving eurozone economic data, could mark the beginning of a recovery. For now, the currency market is in a waiting-and-seeing posture, which is itself a meaningful signal of the absence of directional conviction.

GBPUSD is marginally firmer at plus 0.12%, and USDJPY is similarly nudging higher at plus 0.12%, reflecting modest dollar stability rather than any pronounced directional trend.

 

The Strait of Hormuz: Ongoing but Asymmetric

The shift in Iran's tactical approach from drone strikes to mine-laying in the Strait of Hormuz deserves specific attention. Mine-laying in one of the world's most critical shipping chokepoints is a meaningful escalation in terms of the potential impact on commercial shipping. Still, the US Navy's swift response in sinking sixteen mine-laying vessels before they could complete their mission represents a significant constraint on Iran's ability to execute that strategy effectively.

The mine-laying attempt captures the broader strategic picture: Iran is seeking asymmetric tools to impose costs on its opponents and global commerce, but its capacity to deploy them is being actively degraded. The Strait of Hormuz's status remains a market sensitivity of the first order, as the transit of energy supplies through it directly affects oil prices and, by extension, global inflation and growth expectations. The fact that the US is actively neutralising the threat to shipping provides partial reassurance but does not eliminate the risk.

The strait's status will remain a daily watch point for energy markets throughout the duration of the conflict.

 

A Conflict Being Processed, Not Concluded

The broader framing of where markets stand on day twelve is that they are processing rather than concluding. The initial shock has been absorbed. The asymmetric character of the military engagement has been established. The economic transmission mechanisms, oil prices, energy costs, and safe-haven currency flows are active but no longer in acute escalation mode. Markets are functioning: participants who left the sidelines have returned, indices are broadly within or near their yearly ranges, and the extraordinary volatility of the first week is giving way to a more measured, if still cautious, operating environment.

Concluded is a different status entirely, and nothing that has happened in the past twelve days suggests the conflict is close to a formal resolution. Trump's earlier statement that the situation was "ahead of schedule" provided a momentary signal of de-escalation. Still, concrete evidence of diplomatic progress, ceasefire talks, or the reopening of the Strait of Hormuz to commercial traffic has not yet followed. Markets are trading the expectation of eventual resolution, not its confirmation.

No major corporate earnings are scheduled today, leaving the conflict and the economic calendar as the primary drivers of any price action. Broader macro developments and any signal from the diplomatic or military front will continue to carry more weight than scheduled data releases in this environment.

 

The Bottom Line

Day twelve finds markets in a qualitatively different place than day one. The initial shock has been priced in. Crude oil volatility has subsided from its extraordinary intraday extremes. Indices are broadly stabilising and, in some cases, recovering toward prior ranges. Cautious confidence is returning from the sidelines.

The asymmetric character of the military engagement, with Iran visibly constrained in its ability to escalate through both diminishing drone capability and the neutralisation of its mine-laying vessels, has removed some of the worst-case tail risk that dominated the opening days of the conflict. Markets are now operating in a zone of cautious normalisation rather than acute stress.

European indices are marginally lower in consolidation mode, with Germany 40 back within its yearly range and the FTSE modestly softer. US futures are fractionally mixed, with the path back to February's trading range requiring a break of a former support level that is now potentially acting as resistance. EURUSD sits at a long-term support line, with the next move genuinely difficult to call in either direction.

No major earnings today. The conflict, the strait, and any signals from Washington or Tehran will continue to set the agenda. Markets have settled into this conflict. Whether they remain settled depends on whether the conflict's one-sided character persists.

 

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