David Solomon, Goldman Sachs' Chairman, expressed surprise at the financial markets' surprisingly calm reaction to the escalating Middle East conflict, calling it 'benign'. Speaking at the Australian Financial Review Business Summit, Solomon stated it will take weeks for markets to fully grasp the situation's implications, noting the difficulty in speculation due to significant unknowns. While US assurances on securing the Strait of Hormuz have helped stabilize nerves, the conflict has already reverberated across the region, with Israel's strikes on Tehran and Iran's missile attacks on Qatar, Bahrain, and Oman.

Solomon wasn't surprised by the spike in the VIX Index and other volatility measures, acknowledging the market needs time to digest the potential impacts. Meanwhile, traders are lowering expectations for Federal Reserve interest-rate cuts as fears grow that the war could reignite inflation through higher oil prices.