Goldman Sachs warned that financial markets may be underpricing the risk of renewed conflict in the Middle East, particularly the possibility of another escalation involving Iran or an extended shutdown of the Strait of Hormuz.
According to analyst Dominic Wilson, the recent Iran ceasefire triggered a sharp rebound across global equities, emerging markets, and AI-linked stocks, with major technology-heavy markets such as South Korea, Taiwan, and the NASDAQ Composite recovering to pre-war highs. The rally has been fueled by easing risk fears, strong AI investment momentum, and expectations of improving energy flows.
However, Goldman cautioned that markets may now be too optimistic. The bank believes the biggest downside risk remains a renewed Iran conflict that could once again disrupt oil supply chains and push commodity prices sharply higher. Analysts added that current interest-rate expectations remain relatively hawkish, with fewer anticipated rate cuts across both developed and emerging economies through 2026.
The bank also highlighted growing risks inside the AI sector itself. Technology spending tied to artificial intelligence has now surpassed late-1990s levels as a share of GDP, raising concerns about stretched valuations and increased volatility between AI winners and losers. Goldman noted that this divergence is creating unusually high single-stock volatility while broader market indices remain relatively stable.
Frequently Asked Questions
What is Goldman Sachs warning about?
A possible renewed Iran conflict and oil disruption.
Why are markets rallying?
Ceasefire optimism and strong AI investment demand.
Which markets benefited most?
South Korea, Taiwan, and AI-heavy U.S. tech stocks.
What concerns Goldman about AI stocks?
Valuations may be becoming overheated.
What about interest rates?
Goldman expects fewer rate cuts through 2026.
