A US attack on Iranian nuclear sites could push oil prices even higher, investors warn. This is the most direct impact of the US strikes on Iran on the global economy. The reaction in Middle Eastern stock markets trading on Sunday suggested that investors were betting on a bullish scenario, even as Iran stepped up its missile attacks on Israel in response to the sudden and deep US involvement in the conflict. Investors said they expected the US involvement to trigger a sell-off in stock markets and a possible bid for the dollar and other safe-haven assets when major markets reopen, but they also said there was a high degree of uncertainty about the course of the conflict. “I think markets will be nervous initially and oil will open higher,” said Mark Spindel, chief investment officer at Potomac River. Capital.
“We don't have any assessment of the damage and it's going to take some time. What's next?“, Spindel said.
“I think uncertainty will grip the markets because now Americans everywhere are going to be in danger. This will increase uncertainty and volatility, especially in oil,” he added, as quoted by Daily Sabah.
One indicator of how markets will react this week was the price of ether, the second-largest cryptocurrency and a new gauge of retail investor sentiment after bitcoin, which is now mostly held by institutions.
Ether fell 5% on Sunday, taking losses from the first Israeli strikes on Iran on June 13 to 13%.
Most Gulf stock markets, however, appeared unaffected by the attacks early in the morning, with major indexes in Qatar, Saudi Arabia and Kuwait rising slightly, while Israel’s main index in Tel Aviv hit a record high.
Oil prices, inflation
A key concern for markets would be the potential impact of events in The Middle East on oil prices and therefore on inflation. Rising inflation could dampen consumer confidence and the likelihood of a near-term interest rate cut.
Sol Kavonic, senior energy analyst at equity research firm MST Marquee in Sydney, said the more likely scenario would be for Iran to respond by targeting US interests in the Middle East, including oil infrastructure in the Persian Gulf in places like Iraq or blocking shipping through the Strait of Hormuz.
The Strait of Hormuz lies between Oman and Iran and is a major export route for oil producers like Saudi Arabia, the United Arab Emirates (UAE), Iraq and Kuwait.
„A lot depends on how Iran reacts in the coming hours and days, but it could put us on the path to $100 oil if Iran reacts as it has threatened before," Kavonic said.
While futures for the global benchmark Brent crude oil have risen 18% since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed since the initial plunge when Israel launched its attacks on Iran on June 13.
In comments after Trump announced the strikes, Jamie Cox, managing partner at Harris Financial Group, agreed that oil prices are likely to rise sharply following the initial news. But Cox said he expected prices to likely stabilize in a few days as the attacks could prompt Iran to seek a peace deal with Israel and the United States.
“With this show of force and the complete destruction of its nuclear capabilities, they have lost all their leverage and are likely to press the escape button on a peace deal,” Cox said.
Economists have warned that a dramatic rise in oil prices could hurt a global economy already strained by Trump's tariffs.
However, any pullback in stocks could be fleeting, history shows. During past high-profile instances of escalation in Middle East tensions, including the 2003 invasion of Iraq, and attacks on Saudi oil facilities in 2019, stocks initially fell but soon recovered to trade higher in the following months.
On average, the S&P 500 fell 0.3% in the three weeks since the conflict began, but was 2.3% higher on average two months after the conflict, according to data from Wedbush Securities and CapIQ Pro.
Dollar woes
The escalation of the conflict could have mixed effects on the U.S. dollar, which has slumped this year amid concerns about diminishing U.S. exceptionalism.
In the event of direct US involvement in a war between Iran and Israel, the dollar could initially benefit from a safety net, analysts say.