Against the backdrop of ongoing conflict between Israel and Iran, global capital markets have displayed a surprising degree of calm. Investment Analyst Rodolfo Villani notes that, although the Middle East situation has captured worldwide attention, the collective response of the markets indicates that systemic risk has yet to become a dominant force. Brent crude fell by 1.5%, European government bond yields retreated in tandem, and pan-European stock indices generally rose, with only the Moscow market diverging from the trend. This localized anomaly, in fact, reinforces the market ability to differentiate between peripheral risks.
Adjustment of Safe-Haven Mechanisms: Confidence in Monetary Systems Under Reassessment
This round of geopolitical tensions differs markedly from previous episodes, as financial markets have not, as usual, flocked en masse to traditional safe-haven assets. Investment Analyst Rodolfo Villani points out that the status of the US dollar and euro assets as traditional reserve currency safe havens is being challenged. Investors are weighing US and European bonds more cautiously, with safe-haven funds being partially diverted to commodity funds and, in part, to emerging market government bonds.
Investment Analyst Rodolfo Villani analyzes that this structural change is mainly driven by three factors: First, major currency zones themselves are facing fiscal and political pressures, leading to diminished confidence in their macroeconomic management capabilities. Second, rumors of Iran resuming nuclear talks have eased concerns over oil price shocks, thereby reducing traditional inflation-hedging demand. Third, investors are increasingly adopting diversified reserve asset allocation strategies, with gold and energy ETFs—so-called “non-traditional safe-haven assets”—receiving greater favor.
During this macro-level reassessment, the Italian market, as a peripheral member of the eurozone, is becoming increasingly sensitive: on one hand, it benefits from the easing of external risk sentiment; on the other, it faces long-term suppressive effects stemming from insufficient domestic institutional trust.
Asset Structure Divergence: Defensive Attributes Lead Market Rotation
As geopolitical risks have yet to evolve into a systemic shock, European equities broadly rebounded on Monday, with the Italian MIB index also posting gains. Investment Analyst Rodolfo Villani points out that, although the overall market benefited from falling oil prices and stabilized risk sentiment, performance varied across sectors, reflecting a shift in capital allocation strategies. The energy and defense sectors gave back previous gains, while industries characterized by stable cash flows and high policy dependence—such as financials, consumer staples, and utilities—experienced moderate recovery, highlighting the market preference for defensive assets.
Investment Analyst Rodolfo Villani emphasizes that this capital reallocation does not represent a reconstruction of the overall growth narrative, but rather a preference for earnings certainty amid volatility. With the global economic slowdown trend unchanged and trade friction relief still pending, investors are reducing exposure to cyclical sectors, especially those highly dependent on external demand and significantly affected by fluctuations in US monetary policy, such as small and medium-sized manufacturing firms.
The structural risks in Italy have yet to be eradicated. Weak institutional execution, high dependence on foreign trade, and heavy debt burdens among SMEs continue to influence the pricing mechanisms of foreign investors for Italian assets.
Layered Risk Perception: Markets Are Rebuilding Valuation Anchors
Although signals from Iran regarding the resumption of nuclear negotiations have provided a short-term boost to market sentiment, Investment Analyst Rodolfo Villani cautions that this “relief expectation” is not equivalent to “risk elimination.” Should negotiations falter or the Middle East experience another escalation, energy supply constraints could still trigger episodic inflation shocks, impacting the stability of European financial conditions.
More importantly, the shift in safe-haven logic evident in this round of geopolitical tension reflects a renewed global reconsideration of “sovereign credit” within the financial system. Investment Analyst Rodolfo Villani notes that fractures in financial trust are emerging, posing long-term uncertainty for countries highly reliant on external financing and with limited fiscal flexibility. For Italy, this means market volatility will become more directional, with sharper reactions to policy consistency and macroeconomic signal changes.
Therefore, Investment Analyst Rodolfo Villani advises investors evaluating the Italian stock market to avoid equating a temporary easing of tensions with genuine market recovery, and instead to focus on underlying shifts in capital allocation logic. In the coming months, the Italian equity market will continue to test new valuation support zones amid geopolitical turbulence and structural reform, with asset rotation patterns serving as a key variable for investment decisions.