Geopolitics in Focus: Israel, Iran, and the Impacts on the Global Economy

The June edition of the Market Update live session, held last Thursday (26th), focused on the developments of the recent confrontation between Israel and Iran and its impacts on the markets. The discussion featured experts Jacob Funk Kirkegaard, Senior Fellow at Bruegel and the Peterson Institute, 22V, and Niraj Patel, Chief Equities Strategist at Banco Itaú International. The session was moderated by Marcelo Aagesen, Head of Global Markets and Strategy at Banco Itaú International.

Here are the highlights of the discussion:

Despite the truce in place, Jacob emphasizes that the ceasefire is far from definitive. According to him, Israel conducted highly precise attacks that significantly damaged three of Iran's main nuclear facilities.

Even so, it is estimated that Iran possesses a large amount of enriched uranium in unknown locations – a level close to what is needed for military use. This indicates that, although the program has been weakened, it has not been dismantled.

Based on this scenario, Jacob argues that Israel will remain willing to act if it gains new intelligence on Iran's nuclear advancement. The risk of new offensives is not ruled out, especially because the military and political cost for Israel has been relatively low, given its technological and operational superiority.

Israel's response to the Iranian threat marked a turning point in the balance of power in the region. With logistical support from the United States, Israel managed to intercept up to 90% of the missiles launched by Iran and carried out surgical strikes against strategic targets with high precision.

Jacob notes that the level of intelligence demonstrated by Israel during the conflict was impressive: the country successfully located and attacked military installations and key figures in Iran's command structure.

In his assessment, Israel has signaled that it is more willing to act preventively and does not rely on international organizations as the sole means to contain Iran's nuclear advancement.

Moreover, the loss of influence of Iran's allied groups, such as Hezbollah and the Houthis, reduces the Iranian regime's capacity for retaliation, expanding Israel's room for maneuver.

From a market perspective, the reaction was relatively contained. Niraj Patel observed that, even with the severity of the conflict, risk assets experienced brief declines and quick recoveries. This reflects, according to him, a maturation of investors regarding geopolitical shocks.

The American economy, for example, remains solid, which helps contain overreactions to external crises. Niraj said that this dynamic repeats in various historical episodes: wars, attacks, or conflicts tend to cause short-term noise but do not sustain a risk aversion trend if the economic backdrop is healthy.

Amid uncertainty, the recommendation points to safety: protection and diversification are indispensable. Niraj highlighted the role of assets such as gold, U.S. Treasury bonds, and currencies other than dollar as alternatives to balance the portfolio in times of tension.

Additionally, strategies with structured products can be effective tools to seize opportunities from risk asymmetry – especially in environments of localized volatility.

For the experts, investors who maintain a diversified and well-calibrated portfolio can navigate turbulent scenarios with more tranquility and resilience.

• The ceasefire between Israel and Iran is unstable and may be broken if Iran resumes its nuclear program.
• Israel demonstrated clear military superiority, with high efficiency in interceptions and surgical precision in attacks.
• The possibility of Iran maintaining enriched uranium in hidden locations exacerbates the potential threat.
• Markets reacted mildly, focusing more on economic fundamentals than on the geopolitical crisis.
• The Iranian regime is weakened and isolated, with less regional support and increasing financial pressures.
• Diversification remains essential, with emphasis on gold, fixed income, and tactical strategies to mitigate risks and capture opportunities.