Safe haven rush begins after Israel strikes Iran
Investors fled to safe-haven assets Friday after a series of Israeli airstrikes on Iran marked a major escalation of conflict in the region.
The scale of the attack, which Israel said was targeting Iran's nuclear program, took markets by surprise, pushing up prices of assets thought to offer protection in times of heightened volatility.
"The news has led to significant fears about an escalation and a wider regional conflict," Deutsche Bank strategists said in a note early Friday. "The effects of the attack have cascaded across global markets, with a strong risk-off move for several asset classes."
Gold hit an almost two-month high on the news, although pared some gains as the morning progressed. Spot prices of the metal were up 1.1% at $3,420.24 at 7:42 a.m. London time. Gold futures for August delivery were 1.3% higher at $3.446.
U.S. Treasury prices also rose, pushing yields lower. Yields on the 30-year, 10-year and 2-year Treasury notes were all down around 3 basis points.
European stocks are poised to open sharply lower, meanwhile, with U.S. stock futures also falling.
Investors flee to safe-haven assets during times of uncertainty to protect their money from volatility and find stability when risk assets tumble.
Israel Prime Minister Benjamin Netanyahu said his country had launched a "targeted military operation" against Iran's nuclear and ballistic missile program. Iran said it launched around 100 drones targeting Israel in retaliation.
"This operation will continue for as many days as it takes to remove this threat," Netanyahu added.
U.S. Secretary of State Marco Rubio said the attack on Israel was "unilateral" and made without U.S. support. "We are not involved in strikes against Iran and our top priority is protecting American forces in the region," Rubio said in a statement.
In currencies, the U.S. dollar, Swiss franc and Japanese yen — all considered safe havens — rose.
After a tricky few months following policy uncertainty sparked by the Trump administration, the U.S. dollar index, which measures the greenback against a basket of major peers, was 0.36% higher.
The Swiss franc and Japanese yen both climbed against the dollar earlier Friday, but were broadly unchanged by 6:50 a.m. London time.
The most dramatic market reaction was seen in oil, as investors worried about retaliation from Iran and potential oil supply disruption.
Crude futures jumped as much as 13% following the airstrike, setting them on course for their largest single-day gains since 2020.
U.S. West Texas Intermediate was trading 7% higher at 7:48 a.m. London time at $72.76 per barrel, while global benchmark Brent surged 6.8% to $74.04 per barrel, both off earlier highs.
"Looking forward, the focus is now shifting to what form Iran's retaliation might take. It's also unclear whether talks between the US and Iran over their nuclear programme will continue," the Deutsche Bank strategists added.
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