Goldman Sachs CEO David Solomon surprised by benign market reaction to Iran war

Goldman Sachs CEO David Solomon said he was surprised at markets’ response to the escalating Iran war, calling the dip in stocks “more benign” than he expected as the conflict entered its fifth day.The Wall Street titan said investors haven’t panicked despite Iran’s shutdown of the Strait of Hormuz, a vital oil shipping lane, and threats to target passing vessels in a conflict that led to the killing of the Islamic Republic’s Supreme Leader Ali Khamenei.“I’m actually surprised,” Solomon told the Australian Financial Review Business Summit in Sydney on Wednesday.“I think the market reaction has been more benign, given the magnitude of this, than you might think.”“Markets tend to look at these geopolitical events, and unless they’re transmitting through directly in ways that affect economic growth … markets tend to react in a relatively benign way to these events,” Solomon said.

“That will be the case until it isn’t, and there’s a cumulative effect of everything that’s happening, and you get a much harsher reaction,” he added.The Strait of Hormuz is the world’s most crucial oil transit chokepoint, with roughly one-fifth of the global liquid petroleum consumption passing through the narrow waterway every day.Solomon predicted it could take weeks for markets to fully grasp the fallout.“I think it’s going to take a couple of weeks for markets to really digest the implications of what’s happened both in the short term and in the medium term,” he said.The 64-year-old top boss warned of potential ripple effects throughout the economy if the war drags on.“Does this become a more prolonged thing? Does it start to filter through to energy supply chains? Does it have other impacts that affect consumer sentiments (and) consumer behaviors in different parts of the world?,” he said.

“Those are the things that I think you have to watch, and you don’t have enough information or data at this point to be clear.” Sign...