Global risk appetite softened on Monday as optimism over a potential diplomatic resolution in the Middle East was overshadowed by growing concerns regarding stretched asset valuations.
The shift in sentiment marks a notable change from the previous week, when escalating tensions between the United States and Iran had driven safe-haven flows and supply-side anxiety across energy and equity markets.
With the immediate threat of supply disruption receding, investors appear to be recalibrating portfolios away from geopolitical hedges and toward fundamental valuation metrics.
This rotation has weighed on risk assets, as traders question whether current price levels are sustainable without the premium for geopolitical risk.
The market is now grappling with the dual pressure of normalizing supply expectations and the realization that many assets remain expensive relative to earnings and growth prospects.
In the commodities complex, Brent crude faced headwinds as the supply risk premium evaporated.