If the war between the US and Israel continues, it will continue for years for investors.
Richard Haas, former director of the Council on Foreign Relations, told Yahoo Finance’s Open Bid that the days of ignoring international conflicts are over. He specifically dispels the theory that markets will return to normal.
“When you had oil that low in a $60 zip code, the geopolitical risk premium wasn’t priced in,” Haas said. “I don’t see us going back to that anytime soon.”
He added that until key issues — such as formal consensus and leadership in Iran — are “satisfactorily resolved,” investors should “price a risk premium … probably for years to come.”
Read more: How to protect your money as Middle East turmoil fuels market volatility
For Wall Street, skepticism has become the most reasonable response to the current market volatility. Haas’ warning suggests that the risk-free environment of ultra-low interest rates and massive stimulus that fueled the recent bull run was a mirage. This new geopolitical tax manifests as a higher cost of doing business, increased insurance, and expensive backups that companies must create to survive.
This tax is most visible in technology and software. Investors have treated the sector as a safe bet under the assumption that digital products don’t need a barrel of oil to function.
But this notion is broken. The current controversy has taken a major toll on the physical backbone of the Internet. Data centers, the engines of the AI revolution, are huge consumers of energy.
While Oracle ( ORCL ), for example, has rocketed higher in earnings, the company is still tied to an unstable power grid. Meta ( META ) is spending billions on new AI chips, while Nvidia ( NVDA ) is pursuing cloud partnerships to keep its growth alive. But these chips need stable power and a reliable supply chain to get from the factory to the server rack.
As Haas noted, companies believe they can build large data centers by focusing solely on cheap electricity. But energy security is now indirectly linked to geopolitical risk.
Consequently, supply chains can no longer be built for speed alone; They must be built to survive. Change is expensive, and the costs can trickle down to consumers, affecting everyone from tech giants to everyday consumers.
Especially for software stocks, this means higher operational costs and potential delays, which can be devastating in the AI arms race. For the broader market, this means that fundamental volatility remains a new high.
