As tensions betweenm the US and Iran settle into an uneasy pause, global markets are taking cues from one critical variable — oil. Edward Yardeni believes the current geopolitical situation reflects a fragile equilibrium that is keeping investors cautious. "It seems as though both sides are getting comfortable with this stalemate… a continued ceasefire that includes a US blockade of Iranian ports and an Iranian blockade of the Strait of Hormuz," Yardeni said, pointing to the broader implications for global commodity flows.
“It's probably like a tiger ready to leap upwards. When the price of oil comes down, I think India will go up," he added.
The result, he notes, is a market stuck in wait-and-watch mode. "The stock market is waiting to see how this all plays out." For Yardeni, oil prices have emerged as the most reliable signal amid conflicting geopolitical narratives. "The price of oil probably is the key to all the financial markets," he said, adding that its steady climb toward the $100+ range is "somewhat unnerving."
Yet, the absence of panic suggests markets are betting on supply finding its way out. "The market is very cool about it, betting that one way or another oil will get out of the Middle East." Despite fears that a shutdown of the Strait of Hormuz could trap up to 20 million barrels per day, alternative routes are easing the shock. Yardeni highlighted pipeline flows from Saudi Arabia and rising output efforts from the US and others as key offsets.
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US Dominance May Ease, EMs To Gain
Yardeni also flagged a longer-term shift in global capital flows. The US currently accounts for about 63% of global market capitalisation, a sharp rise from around 40% in 2010. "There's room for that to come down and for some of that share to actually benefit emerging markets," he said, suggesting a potential rebalancing ahead.
While some markets like South Korea and Taiwan are tied to the AI boom, Yardeni sees India as a standout — albeit one currently constrained by high oil prices.
Once clarity emerges on oil and the geopolitical backdrop, Yardeni expects India to outperform. "India has certainly got a lot going for it, and I think the market's been held back because of the oil situation,” he said. His outlook is, "Once we get the price of oil to come back down, India will probably be one of the better performers."
Beyond macro triggers, Yardeni pointed to India's three structural strengths — entrepreneurial energy, deep pools of human capital, and an evolving financial ecosystem.
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