David Solomon said he's surprised by the market's reaction to the Iran war
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- Goldman Sachs CEO David Solomon says markets have been surprisingly calm amid the Iran conflict.
- US and Israel's strikes on Iran have whipped up stock volatility and driven oil prices higher.
- Solomon warns markets may need weeks to fully absorb the conflict's economic impact.
Investors have been rattled by potential fallout from the war in Iran, but Goldman Sachs CEO David Solomon says markets have held up better than he expected.
"I'm actually surprised," Solomon said at the Australian Financial Review Business Summit in Sydney on Wednesday.
He added that the market reaction has been "benign" given the magnitude of the development.
Since the US and Israel launched strikes on Iran over the weekend and the conflict widened across the Middle East, markets have been volatile, and oil prices have climbed amid fears of supply disruption from the region.
Solomon said it may take time for investors to fully process the geopolitical shock and its economic consequences.
"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 or in the medium term," he said.
Solomon pointed to several open questions that could determine whether the conflict has a deeper and more lasting impact on global markets.
He said investors are trying to determine whether the conflict will drag on, disrupt global energy supply chains, or spill over into consumer confidence and spending patterns around the world.
While volatility has picked up in some corners of the market, Solomon said broader risk repricing may still be underway.
"The one thing that happens for sure whenever you have an event like this is people want a higher risk premium for any kind of risk asset they're in, and so people start repricing things at the margin. And certainly we're seeing that," he said.
Risk assets, like cryptocurrencies and emerging market stocks, have been under pressure this week, with the MSCI Emerging Market Index down 5.2% so far this month.
On Wednesday, South Korea's Kospi index fell sharply, triggering a circuit breaker after losing 8%.