Geopolitical shocks trigger sharp volatility as investors seek balance between panic and opportunity

1. On Tuesday, U.S. stocks experienced intense volatility. The Dow Jones Index initially plunged about 1,200 points (a drop of 2.6%), then recovered part of the losses, but still closed down more than 400 points (0.8%). The market struggled to fully price in the economic impact of geopolitical shocks, highlighting volatility. The Cboe Volatility Index surged initially and then retreated. During Wednesday's Asian session, Asian stock markets continued their decline: the Nikkei 225 Index dropped as much as 4.6%, South Korea's stock market fell up to 12%, Australia's stock market dropped more than 2%, and Thailand's stock market fell over 8%.2. The most immediate concern for the market is the disruption of oil supply. The Strait of Hormuz, as a global oil transportation chokepoint, could see a potential long-term closure that may push up oil prices and reignite inflation. Further price pressures and worries about the spread of conflict fueled early morning sell-offs. Investors pointed out that inflation mainly affects stock prices through its impact on Federal Reserve policy.3. Some investors believe the oil shock may be temporary and are taking advantage of the sell-off to buy. The CEO of Key Advisors stated that if their judgment is correct, industrial stocks, homebuilders, small-cap stocks, and emerging market equities are "excellent buying opportunities," expecting them to rise within three weeks.4. Veteran traders remind that investors often find it difficult to balance between geopolitical headlines and actual market movements, and the market sometimes reacts in the most unexpected ways. "When this market is ready to fall, the reason will be something we don't understand, not because of some widely publicized war." Other markets such as gold, silver, oil, and the panic index all showed similar volatility patterns.