UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'War and long-term economics'
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Mar 3, 2026 Discussion of how rising oil and gas prices affect markets and the dollar. Examination of modern warfare’s effects via drones, cheap tech and social media. Analysis of long-term fiscal and military procurement pressures. Exploration of how conflict disrupts Gulf economic diversification, tourism and expatriate flows.
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Commodities Buying Explains Dollar Strength
- The Gulf war produced predictable short-term market moves like higher oil, gas and a modestly stronger dollar.
- Paul Donovan notes treasuries didn't strengthen, suggesting dollar gains partly reflect buying dollars to pay for commodities rather than a pure safe-haven flow.
Cheap Tech and Social Media Change Warfare
- The war reinforces changing warfare: cheap tech like drones plus social media amplification alters impact and public sentiment.
- Donovan links this to lessons from Russia-Ukraine, noting drones hit the US Embassy in Saudi Arabia as an example.
Conflict Raises Long Term US Fiscal And Defense Costs
- The war will be costly for the US over time through fiscal pressures and the need to replenish and expand weapons procurement.
- Donovan suggests this spending pressure may help explain weaker US government bond performance.