US Conducts Limited Strike on Iranian Nuclear Sites — No Broad Escalation Expected

On Saturday evening (US time), the United States conducted precision airstrikes on Iran’s nuclear facilities, Fordow, Natanz, and Isfahan. While the move marks a notable escalation in tensions, available intelligence and diplomatic channels suggest this was a calibrated, one-off operation, not the beginning of a broader military campaign.

Markets are understandably jittery, but we caution against overreacting. In our view, this is a tactical moment for investors to rebalance exposures, particularly in FX, gold, and equities, in anticipation of renewed medium-term trends.

 

🔍 What Happened?

The US launched well-targeted airstrikes on three Iranian nuclear sites, Fordow, Natanz, and Isfahan, leveling infrastructure suspected of contributing to Iran’s nuclear enrichment activities. Despite earlier denials of a pending operation, US leadership later confirmed the strike, calling it “very successful.” The key target at Fordow was reportedly fully neutralized.

Early reports indicate that the targeted facilities had been pre-evacuated and that no radiation leaks have occurred. Tehran responded with strong rhetoric and symbolic missile launches, but there has been no immediate large-scale military retaliation.

Diplomatic sources suggest that Washington has communicated the limited scope of the strikes to Tehran, emphasizing that the operation is not part of a broader regime-change effort. Regional powers, including Saudi Arabia, Iraq, and the UAE, have called for restraint and intensified diplomatic engagement.

We do not foresee major powers such as Russia, China, and India entering the conflict:

• Russia remains strategically aligned with Iran, but its military bandwidth is consumed by the war in Ukraine. Moscow appears more inclined toward mediation than confrontation.
• China, while expanding its diplomatic and economic footprint in the region, has no operational military experience abroad, making direct military intervention highly improbable. Beijing’s posture remains transactional and diplomatically cautious.
• India is managing an active security rivalry with Pakistan and cannot afford strategic entanglement elsewhere. It lacks both the capacity and the political will to engage militarily in the Gulf region.
• Egypt, facing severe economic distress and dependent on Gulf financial support, may offer symbolic or logistical military assistance to regional allies in exchange for aid. While it is unlikely to lead or initiate any campaign, Cairo could leverage its military as a bargaining chip, reinforcing its transactional diplomacy model.

 

🔮 What Do We Expect?

We maintain a base-case scenario of containment rather than escalation:

• Iran’s retaliatory capabilities are constrained, particularly after recent precision targeting of critical infrastructure, but some resources remain intact.
• Major powers, especially Russia, China, and India, have no appetite for further military engagement and are signaling support for de-escalation.
• Energy markets may experience short-term volatility, but structural safeguards remain in place:
• OPEC+ can increase production if necessary.
• Strategic Petroleum Reserves (SPRs) provide short-term supply buffers.
• Shipping lanes in the Strait of Hormuz remain operational, with no immediate threats to maritime flow.

 

💼 Investment Implications

1. Use USD strength to diversify
   The US dollar may see short-lived safe-haven demand, but we believe this is an opportunity to rebalance USD-heavy exposures. Medium-term headwinds remain:

• Slowing US growth momentum
• Potential Fed rate cuts in 2H 2025
• Elevated fiscal deficits and domestic political uncertainty

We recommend diversifying into the euro, Swiss franc, and select Asian currencies (e.g., SGD, JPY, KRW), where relative fundamentals and central bank policy are more supportive.

2. Add exposure to gold
   Gold remains a robust hedge against geopolitical risk, currency debasement, and real rate volatility. In the current environment:

• Real rates are drifting lower
• Dollar strength is peaking
• Geopolitical uncertainty is elevated

We maintain a base-case price target of USD 3,500/oz, with upside toward USD 3,800/oz in a deeper risk-off environment or if the conflict escalates.

3. Tactically reassess equity exposure
   We do not anticipate a prolonged inflation shock or disruption in energy flows. Any initial equity sell-off should be viewed as a tactical opportunity, especially for investors underweight in risk assets. We favor:

• Energy sector laggards
• High-quality global industrials
• Defensive technology and infrastructure plays

Volatility-driven dislocations may present attractive entry points, particularly in sectors with strong balance sheets and pricing power.

 

⚠️ Downside Risk Scenario (Tail Risk View)

While unlikely, escalation could occur through:

• Miscalculated Iranian retaliation
• Proxy conflict via non-state actors
• Attacks on Gulf shipping routes

In such a scenario, investors should prepare for:

• A sharp spike in oil prices above USD 120/barrel
• Further risk-off flows into gold and the USD
• Temporary central bank measures to preserve market liquidity

That said, current diplomatic momentum and regional caution strongly mitigate this tail risk.

 

📡 Forward-Looking Macro Risk Radar

Risk Factor	Base Case	Watch For
Iran-US Tensions	One-off strike, verbal retaliation	Proxies targeting Gulf shipping or US assets
Oil Prices	Mild spike, then stabilize	Sustained > USD 100/barrel on supply disruption
Fed Policy	Pivot to cuts in 2H 2025	Hawkish reversal if inflation unexpectedly rises
USD Outlook	Short-term strength, medium-term weakness	Disruption in global capital flows or US credit
China/India/Russia Involvement	Diplomatic, not military	Shift in rhetoric or defense posture
Egypt & Gulf States	Diplomatic restraint; Egypt transactional	Cairo or Riyadh hinting at direct involvement

 

📌 Conclusion

The US strike on Iranian nuclear facilities has triggered short-term market volatility, but the broader strategic backdrop continues to favor containment over escalation. We view the current USD strength as transitory and recommend using it to rebalance into more diversified currency exposures. Gold remains a resilient hedge in this environment, while equity pullbacks should be approached as tactical entry points into medium- to long-duration growth names, distinct from defensive plays.

In a world seeking geopolitical stability and monetary clarity, disciplined asset allocation, not headline-driven sentiment, remains the most reliable strategy.