Volatility in global equity markets appears to be re-emerging after the latest US warning of impending retaliation from Iran, which could include multiple attacks on Israel as early as this week.

Speaking at a press briefing on Monday, August 12, White House national security spokesman John Kirby confirmed that the US is monitoring the situation in the region “very, very closely”.

“It’s hard to know at this particular point, if there is an attack by Iran and/or its proxies, what that might look like. But we have to be prepared for what could be a significant array of attacks,” he told reporters.

Speaking to InvestorDaily, GSFM investment strategist Stephen Miller noted that markets have been "on edge" since Iran's Revolutionary Guard issued a statement on August 3 vowing to avenge the killing of Hamas leader Ismail Haniyeh.

Miller warned that if these tensions continued or escalated, they would not only affect oil prices, but could worsen fears of a US recession, complicate the Reserve Bank of Australia's efforts to control inflation and provide higher for longer interest rate scenario.

"If we see an attack this week, it's likely that oil prices will respond, but that will depend on how each conflict unfolds, the longevity of that response and its side effects through financial asset prices, markets, etc.," he explained. he.

Oil prices jumped more than 3 percent on Monday, August 12, after several days of growth. But on Tuesday, the rally ended, with global benchmark Brent crude futures down roughly 0.95 percent to $81.52 a barrel.

"I know oil prices don't feed directly into core CPI, but they do through the second round of things, so that's the main concern about what's going on in the Middle East," Miller noted.

He expects this instability to continue until the nature of the potential conflict between Iran and Israel becomes apparent.

The investment strategist also acknowledged the market's concerns about the possibility of US intervention, telling InvestorDaily that the US "will never sit idly by."

"Whether the U.S. takes a more active role in the Middle East in the event of a conflict, I'm not sure if that alone will increase fears of a recession, I suspect it complicates the outlook for oil and oil prices, and that's the main reason for the deepening recession [fears]Miller said.

Referring to the oil crisis of 1973. and the 1979 energy crisis, Miller noted that while the potential conflict may not reach the same scale, he warned that if it continues, "it may not be long-lasting."

"And if it is long-lasting, it will mean that bouts of volatility in financial markets will be more prolonged, albeit episodic," he said.

Jun Bei Liu, lead portfolio manager at Tribeca Investment Partners, agreed that the US intervention would escalate anxiety.

"The U.S. economy is already slowing down and then if you start deploying troops, then everybody's going to worry about the economy, the financial cost, then the conversation becomes completely different," she said.

"Then it's 'is the recession real?' and 'should the Fed cut more?'

However, if the world's largest economy, along with its peers, manages to avoid participation, Liu suggested the impact may not be as widespread.

"We've seen it over and over in many different conflicts, it just doesn't last very long," she told InvestorDaily.

"[The tensions] it will affect confidence initially and you will have a few days of sales, but it will not be long-lasting.”

She also noted that oil could come to the fore as investors begin a potential flight to "safe harbor" assets.

"There is already talk of oil stocks – it just seems like there's a lot of demand now, willing to buy oil,” she said.

Gold is also likely to see a "flight to quality," Liu explained, with investors looking to "be defensive in a world where there is geopolitical conflict."

"Gold generally performs well, but oil is the most directly affected," she added.

Liu predicted that defense companies would also attract investor interest, expecting a short-term boost in sentiment.