The war in Iran is scrambling Wall Street’s playbook for safe investing

New York (CNN) — The war in Iran and the spike in energy prices have rattled global markets, impacting not just stocks but also safe havens like bonds, gold and currencies. That’s leaving investors with fewer places to hide.

The S&P 500 is set for its worst month in a year. When stocks hit a rough patch, or economic uncertainty abounds, safe haven assets like gold or government bonds can provide investors with some protection. But they’ve both dropped alongside stocks this month, serving little value as a hedge against the turmoil.

US stocks opened lower Thursday: The Dow fell 244 points, or 0.53%. The S&P 500 fell 0.8% and the Nasdaq sank 1.1%. Gold futures fell 2.5% and Treasury yields ticked higher as investors sold bonds.

“Volatility persists when uncertainty is high,” said Mitch Hamer, founder and lead advisor at Intersecting Wealth. “The volatility measuring stocks, volatility measuring Treasuries, it’s elevated everywhere you look.”

There has been a stark market reaction because of the direct impact on oil prices, and the uncertainty about the duration of the conflict. Oil prices moved higher Thursday as investors grew skeptical of efforts to end the war: Brent crude rose 4% to just over $101 per barrel. US crude also rose 4% to nearly $94 per barrel.

“It all boils down to oil markets and the implications on inflation,” said Adam Turnquist, chief technical strategist at LPL Financial. “There’s really no clarity on when this war will end, despite a lot of confusing commentary.”

The S&P 500 is down more than 6% from its record high in late January, and uncertainty could persist as long as the Strait of Hormuz is effectively shut.

Gold has fallen nearly 16% this month, putting it on track for its worst month since October 2008. Higher oil prices, and the prospect of energy inflation, are shifting the outlook for central banks across the globe. Higher-for-longer interest rates raise the opportunity cost of holding gold, which doesn’t pay income.

Bond prices have fallen this month, pushing yields higher. Treasury yields have climbed as investors adjust expectations for inflation and fewer interest rate cuts.

“The global bond market selloff continued through the London and European session, with the focus remaining on potential central bank reactions to rising oil prices,” John Canavan, lead analyst at Oxford Economics, said in a Thursday note.

Long-term bond yields have also risen just as the Trump administration is seeking $200 billion to fund the Iran war — adding to concerns about the deficit.

The US dollar has emerged as somewhat of a safe haven, rising 2.3% this month. Short-term money market funds and cash equivalents can offer places to hide from the volatility. Traders are pricing in no rate cuts from the Federal Reserve this year, which could also result in money market funds and savings rates staying higher for longer.

“The Strait of Hormuz remains essentially shut, the conflict is not over, and Truth Social posts are not a replacement for concrete diplomatic discussions that can lead to a lasting end to conflict across the region,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

“For most investors, we advise staying informed, avoiding overreacting to headlines, and maintaining a balanced investment approach amid what could be continued near-term volatility,” Saglimbene said.

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