‘Finger on Trigger’: War fears rattle markets as Benjamin Netanyahu warns Iran — Is volatility back?

Israel has signalled that the ongoing ceasefire with Iran remains uncertain, raising questions over whether the conflict has truly ended, even as financial markets show early signs of recovery following easing geopolitical tensions.

Israeli Prime Minister Benjamin Netanyahu said the current pause in hostilities is only temporary and warned that military action could resume if strategic objectives are not met.

“I want to make this clear: We still have goals to complete, and we will achieve them either by agreement or by resuming the fighting. We are prepared to return to combat at any moment required. Our finger is on the trigger,” he said in his first address after the ceasefire announcement.

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Israel outlines strategic objectives

Israel’s primary objective remains preventing Iran from enriching uranium, which it believes could be used for nuclear weapons development. Netanyahu described the ceasefire as a “milestone on the path to achieving all goals,” rather than a final resolution.

He said, “Iran is entering negotiations battered and weaker than ever. It has committed to reopening the Strait of Hormuz after relinquishing all its preconditions. It gave up its demands for the lifting of sanctions, receiving compensation, an end to the war, and a ceasefire in Lebanon.”

“At a time when Iran is weaker than ever, Israel is stronger than it has ever been,” he added.

Diplomatic talks set amid fragile truce

The warning comes ahead of planned diplomatic talks between the US and Iran in Islamabad, where both sides are expected to engage directly following weeks of conflict. The US delegation will be led by Vice President JD Vance, while Iran’s side will be headed by Parliament Speaker Mohammad Bagher Ghalibaf.

The talks follow a two-week ceasefire announced by US President Donald Trump, who had earlier suspended the “bombing and attack” campaign, citing progress on a proposed framework for de-escalation.

Markets see relief, but caution persists

Back home, market participants are assessing whether the worst phase of uncertainty is over. According to Vikas Khemani, founder of Carnelian Asset Management & Advisors, the ceasefire has brought some relief to sentiment, though risks remain.

Khemani said geopolitical tensions typically cause sharp but short-lived reactions in financial markets. “Every two to three years, markets face some form of uncertainty, whether from geopolitics or macro factors. This is not new for investors,” he said.

He noted that past crises, such as the Ukraine war, the COVID-19 pandemic, and the global financial crisis, triggered temporary corrections but did not derail long-term growth trends.

“We have seen multiple crises over the years. At that time, each one feels very big. But eventually, they pass,” he said. Khemani said markets tend to bottom out near the peak of uncertainty, even before clarity emerges.

“Market bottoms are usually formed around the peak of the crisis. After that, even if news flow remains negative, markets tend to stabilise and recover,” he said.

He added that the current situation may have already crossed its most intense phase. “I feel the peak of this crisis is behind us. There may be news-driven volatility, with markets moving 1–2 per cent up or down, but the worst may be over broadly,” he said.

Investment strategy in uncertain times

Despite improving sentiment, Khemani cautioned that predicting geopolitical events or timing the market remains difficult. “You cannot plan for these situations. They are imposed on you. The key is how you react, not trying to predict them,” he said.

He advised investors to focus on portfolio quality and avoid panic-driven decisions during volatile periods. “This is a period to build positions. Investments made over the next two to three months can deliver good returns over the next two to three years,” he said.

Khemani said short-term market movements should not dictate investment decisions, especially when long-term fundamentals remain intact.

Sectoral outlook and opportunities

On sectoral trends, Khemani said banking and financial services, along with capital goods and infrastructure, could lead the next phase of recovery. “The biggest correction has been in BFSI despite limited fundamental impact. That could become a leader again,” he said.

He added that capital goods and infrastructure stocks, which saw sharp corrections during the crisis, may offer attractive opportunities. Khemani also pointed to valuation comfort emerging after recent declines.

“If long-term business value remains intact, a 30–40 per cent correction becomes an opportunity, not a risk,” he said. He explained that a significant portion of company valuations is driven by long-term earnings, which are often unaffected by short-term disruptions.

Long-term outlook intact

Khemani maintained that the broader growth story remains unchanged despite ongoing global uncertainties. “Most businesses are not permanently impacted. The long-term story remains intact, and that is where investors should focus,” he said.