Former U.S. Treasury Secretary Lawrence Summers believes markets are far less reactive to geopolitical conflict than many expect, citing the recent example of flaring tensions in Iran.
What Happened: On Thursday, Summers posted on X, discussing his recent Bloomberg interview where he addressed the market’s response to the flare-up in the Middle East.
Despite the gravity of the situation, including Israeli strikes on Iranian infrastructure and fears of broader escalation, financial markets have remained largely resilient. Summers says this is because, “geopolitics are much less significant for markets than geopolitical people think they should be.”
See Also: Iran Breaks Silence, Says Nuclear Facilities ‘Badly Damaged’ By US Strikes
His comments come amid equity markets remaining remarkably stable amid the nearly two-week-long crisis involving Iran, Israel and the United States. Crude oil prices, however, did experience some volatility, rallying 21% from the beginning of this month to a high of $76.16 per barrel last week, before mellowing down to $68.
Summers explains this by saying that the “markets have a life of their own, driven by longer term assessments,” adding that they are less responsive to even “very dramatic short term events.”
He concludes by saying that “events are ultimately less important than trends,” underscoring his belief that investors’ behavior is guided more by long-term fundamentals than by momentary panic.
Why It Matters: Last week, hours after President Donald Trump called for an “unconditional surrender” by Iran, markets remained unfazed by the threat, with U.S. stock futures continuing to trade flat.
Several other leading market experts have echoed similar views, with Steve Eisman saying that the crisis could be “extremely positive for the markets,” helping bring stability and growth to the Middle East.
Senior analyst, Dan Ives, believes the crisis is already in the “rear-view mirror” of the markets, and calls it broadly “a positive” for the Middle East and the tech sector.
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