* Ex-military advisors predicted military action, aiding

financial firms

* Geopolitical risk analysis demand surges amid U.S.-Iran

tensions

* Investors seek updates on oil prices, shipping routes,

and conflict impact

* Financial industry merges national and economic

security strategies

* Investors moved into Treasuries despite inflation,

hinting at conflict anticipation

By Douglas Gillison, Gertrude Chavez-Dreyfuss and Michelle

Price

WASHINGTON/NEW YORK, March 12 (Reuters) - The day before

U.S.-Israeli air strikes killed Iran's Supreme Leader on

Saturday February 28, many Wall Street firms were expecting

military action thanks to a growing industry of ex-military and

national security advisors who were warning the signs were

clear.

Around 6 p.m. ET that Friday evening, for example,

geopolitical risk consultancy WestExec Advisors, advised

clients, which include big banks, that there was a 65%

probability of military action that weekend, said its managing

partner Nitin Chadda.

"It was clear to us that there was an intention to take some

meaningful Iran military action," said Chadda, adding the firm

had experienced an uptick in queries from financial clients and

had been helping some banks plan scenarios for how the conflict

may evolve.

A former senior Pentagon adviser, Chadda co-founded WestExec

in 2017 with others including Antony Blinken who became

Secretary of State in 2021. Its clients have included investment

bank Lazard ( LAZ ), private equity giant Blackstone, and Japan's

Softbank, according to 2021 media reports based on Blinken's

Senate disclosures at the time.

Demand for such geopolitical analysis surged as rising

U.S.-China tensions under President Trump's first administration

and the COVID-19 pandemic jolted supply chains and markets, and

continued growing with the war in Ukraine.

The recent Middle East conflict, which has sparked volatility in

stocks and bonds and a crisis in the oil market, has underscored

the importance of those investments, especially given Trump's

erratic foreign policy and propensity for U-turns.

Wall Street has been abuzz with briefings from ex-military

and national security experts as investors and companies

scramble for insight on issues ranging from Iran's stockpile of

mines to the knock-on effects of the conflict for semiconductor

manufacturing, said more than half a dozen other consultants,

banking sources and investors.

"What you're really seeing from the financial industry is how

national security and economic security have been merging over

the last few years, and that is accelerating," said Amy

Mitchell, founding partner at geopolitical consultancy Kilo

Alpha Strategies who was previously a senior Pentagon adviser.

LOOKING FOR 'TRIPWIRES'

The strikes followed a three-week round of U.S.-Iran

negotiations aimed at curbing the Islamic Republic's nuclear

ambitions during which Trump threatened to use force and the

U.S. massively boosted its military presence in the Gulf.

Negotiations wrapped up that Thursday with no sign of a

breakthrough, but Omani mediators said there had been progress

and that the two sides would resume talks in coming days.

Some doubted that would happen. While WestExec had no access

to U.S. war plans, executives there sensed growing frustration

from people close to the discussions, while other clues pointed

to an imminent strike, said Chadda.

Among them was what he characterized as a "last ditch"

Washington visit by Oman's foreign minister that Friday.

Chad Sweet, a former CIA officer and CEO of The Chertoff Group,

a global advisory firm with financial clients, said the arrival

of the USS Gerald R. Ford aircraft carrier in Israel early

Friday was another clear sign.

Others pointed to reports that the U.S. had allowed some embassy

staff in the region to leave.

"That was one of the final major trip wires," said Jay

Truesdale, CEO of TDI, a global advisor on geopolitical

strategy.

The firm had already explained to clients, including hedge

funds, traders, shippers, and industrials, that they should

monitor indications of potential government actions that reflect

the war plan, said Truesdale, adding such information is gleaned

from open sources.

"We knew that once the trip wires were triggered that the

likelihood of military action within 24-72 hours dramatically

increased."

Strange moves in U.S. Treasuries that Friday suggested some

investors were betting on those signs.

Despite surprisingly hot inflation data that would normally

drive investors to dump long-term Treasuries, traders were

moving in the opposite direction, pushing yields on the

benchmark 10-year Treasury note below 4%. Such a

sharp move into the safe-haven asset would usually be triggered

by an adverse macro event - or the strong belief that one was

imminent.

Tom di Galoma, managing director of global rates trading at

Mischler Financial, a boutique broker-dealer, said there was

talk in the market that the movements may have been prompted by

briefings from ex-military officials.

White House press secretary Karoline Leavitt said in an

email statement that Iran posed an imminent threat and the

strike was a courageous decision.

DEMAND FOR GEOPOLITICAL RISK ANALYSIS

Amid growing investor demand, JPMorgan ( JPM ), Bank of America ( BAC ), Lazard ( LAZ ),

Goldman Sachs ( GS ) and Deutsche Bank, among others, have launched

their own geopolitical advisory operations in recent years,

while others have invested in military and national security

expertise.

In November 2022, Deutsche said it had hired the late former

U.S. Secretary of State Henry Kissinger. Last year, Santander

hired the former head of the British Army General Sir Patrick

Sanders, to advise on its defense lending push.

Spokespeople for Deutsche Bank, JPMorgan ( JPM ) and Santander

declined to comment, while Goldman Sachs ( GS ) did not respond to a

request for comment. A BofA spokesperson said its geopolitical

department includes experienced national security and

intelligence analysts.

As the conflict widens, investors are seeking situational

updates, intelligence on shipping transit routes, the trajectory

for oil prices, and the impact of the crisis on energy-sensitive

industries, people said.

"It's been 24/7, fielding very specific questions from

clients across the spectrum, including investors and energy

folks," said Teddy Bunzel, head of Lazard's ( LAZ ) geopolitical

advisory business, which launched in 2022 and has several former

military advisors including retired four-star Admiral William

McRaven.

"Everyone is wondering - how does this end?"

(Additional reporting by Paritosh Bansal, Vidya Ranganathan,

Caroline Valetkevitch and Laura Matthews; Editing by Nick

Zieminski)