Stocks tumble, oil prices jump after Israel attacks Iran

CNA

18 hours ago

LONDON :World stock markets tumbled on Friday and oil prices surged as Israel launched a military strike on Iran, sparking a rush into safe havens such as gold, dollar and Swiss franc.
An escalation in the Middle East - a major oil-producing region - adds uncertainty to financial markets at a time of heightened pressure on the global economy from U.S. President Donald Trump's aggressive and erratic trade policies.
Market reaction was swift.
Crude oil jumped as much as 14 per cent at one point to almost $79 a barrel, before pulling back to around $74 - still up more than 5 per cent on the day and set for the biggest one-day jump since 2022. U.S. oil futures rose over $5 t0 $73.14.
Gold, a classic safe-haven at times of global uncertainty, rose to $3,416 per ounce, bringing it close to the record high of $3,500.05 from April.
The rush to safety was matched by a dash out of risk assets. U.S. stock futures fell over 1.5 per cent, European shares dropped 1 per cent at the open and in Asia, major bourses in Japan, South Korea and Hong Kong fell over 1 per cent each.
"Clearly the big question is how far does this go?," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London, referring to the Middle East tension.
"The market has got it right in terms of stocks down, oil and gold up."
Israel launched wide scale strikes against Iran, saying it targeted nuclear facilities, ballistic missile factories and military commanders during the start of a prolonged operation to prevent Tehran from building an atomic weapon.
Iran had launched about 100 drones towards Israeli territory in retaliation, which Israel is working to intercept, an Israeli military spokesman said.
Washington said it was not involved in the Israeli offensive.
The developments mean another major geopolitical tail risk has now become a reality at a time when investors are wrestling with major shifts in U.S. economic and trade policies.
"The geopolitical escalation adds another layer of uncertainty to already fragile sentiment," said Charu Chanana, chief investment strategist at Saxo, adding that crude oil and safe-haven assets will remain on an upward trajectory if tensions continue to intensify.
The Israeli shekel fell almost 2 per cent and long-dated dollar bonds for Israel, Egypt and Pakistan slipped.
SAFE-HAVEN RUSH
U.S. Treasuries were bought in the rush for safer assets, sending the yield on 10-year notes to a one-month low of 4.31 per cent. Bond yields move inversely to prices.
Germany's 10-year bond yield touched its lowest level since early March at around 2.42 per cent.
Daiwa's Scicluna said a further push higher in oil prices could dampen expectations for central bank rate cuts.
"The ultimate response in bond markets to geopolitics is going to depend on how sharp the rise in energy prices is going to be," he said.
Some traders were attracted to the dollar as a haven, with the dollar index up 0.6 per cent to 98.277, retracing most of Thursday's sizeable decline.
Still, the dollar is down 1 per cent for the week in a sign that sentiment towards the greenback remains bearish.
The Swiss franc briefly touched its strongest level against the dollar since April 21, before trading 0.2 per cent lower at around 0.8118 per dollar.
Fellow safe haven the Japanese yen edged down 0.2 per cent to 143.79 per dollar, giving up earlier gains of 0.3 per cent.
The euro was down 0.4 per cent at $1.1534, after rising on Thursday to the highest since October 2021.
Sterling slipped 0.4 per cent to $1.3556, after marking a fresh high since February 2022 at $1.3613 early in the day.
"Traders are now on edge over the prospects of a full-blown Middle East conflict," said Matt Simpson, a senior market analyst at City Index.