Investors brace for oil price spike, rush to safe havens after US bombs Iran nuclear sites

New York Post

4 hours ago

A US attack on Iranian nuclear sites could push oil prices even higher and trigger a knee-jerk rush to safety, investors said, as they assessed how the latest escalation of tensions would ripple through the global economy.
The reaction in Middle East stock markets, which trade on Sunday, suggested investors were assuming a benign outcome, even as Iran intensified its missile attacks on Israel in response to the sudden, deep U.S. involvement in the conflict.
President Trump called the attack 'a spectacular military success' in a televised address to the nation and said Iran's 'key nuclear enrichment facilities have been completely and totally obliterated.' He said the U.S. military could go after other targets in Iran if the country did not agree to peace.
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Iran said it reserves all options to defend itself, and warned of 'everlasting consequences.' Speaking in Istanbul, Iranian Foreign Minister Abbas Araqchi said Tehran was weighing its options for retaliation and would consider diplomacy only after carrying out its response.
7 President Trump called the attack 'a spectacular military success.'
REUTERS
Investors said they expected US involvement would cause a stock market selloff and a possible bid for the dollar and other safe-haven assets when major markets reopen, but also said much uncertainty remained.
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'I think the markets are going to be initially alarmed, and I think oil will open higher,' said Mark Spindel, chief investment officer at Potomac River Capital.
'I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil,' he added.
One indicator of how markets will react in the coming week was the price of ether, the second-largest cryptocurrency and a gauge of retail investor sentiment.
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'We don't have any damage assessment and that will take some time. Even though (Trump) has described this as 'done', we're engaged,' Spindel said.
Ether was down 8.5% on Sunday, taking losses since the first Israeli strikes on Iran on June 13 to 13%.
7 Iran has warned of 'everlasting consequences' over the U.S. attack.
via REUTERS
Most Gulf stock markets, however, seemed unconcerned by the early morning attacks, with the main indexes in Qatar, Saudi Arabia, and Kuwait up slightly or flat. Israel's Tel Aviv main index was at an all-time high.
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A key concern for markets centers around the potential impact of Middle East developments on oil prices and thus on inflation. Rising inflation could dampen consumer confidence and lessen the chance of near-term interest rate cuts.
Saul Kavonic, a senior energy analyst at equity research firm MST Marquee in Sydney, said Iran could respond by targeting American interests in the Middle East, including Gulf oil infrastructure in places such as Iraq or harassing ship passages through the Strait of Hormuz.
7 Traders are bracing for a rocky day on Wall Street when markets open Monday.
AFP via Getty Images
The Strait of Hormuz lies between Oman and Iran and is the primary export route for oil producers such as Saudi Arabia, the United Arab Emirates, Iraq and Kuwait.
'Much depends on how Iran responds in the coming hours and days, but this could set us on a path towards $100 oil if Iran respond as they have previously threatened to,' Kavonic said.
While global benchmark Brent crude futures have risen as much as 18% since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13.
7 Brent crude futures have risen as much as 18% since June 10,
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Jamie Cox, managing partner at Harris Financial Group, said oil prices would likely spike before leveling off in a few days as the attacks could lead Iran to seek a peace deal with Israel and the U.S.
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'With this demonstration of force and total annihilation of its nuclear capabilities, they've lost all of their leverage and will likely hit the escape button to a peace deal,' Cox said.
Economists warn that a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs.
7 During past Mideast, stocks initially languished but soon recovered to trade higher in the months ahead.
AFP via Getty Images
Still, any pullback in equities might be fleeting, history suggests. During past eruptions of Middle East tensions, including the 2003 Iraq invasion and the 2019 attacks on Saudi oil facilities, stocks initially languished but soon recovered to trade higher in the months ahead.
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On average, the S&P 500 slipped 0.3% in the three weeks following the start of conflict, but was 2.3% higher on average two months following the conflict, according to data from Wedbush Securities and CapIQ Pro.
An escalation in the conflict could have mixed implications for the U.S. dollar, which has tumbled this year amid worries over diminished U.S. exceptionalism.
7 Analysts say the dollar could benefit from a safety bid in the event of direct US engagement in the Iran-Israel war.
AFP via Getty Images
In the event of U.S. direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said.
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'Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger,' said Steve Sosnick, chief market strategist at IBKR in Greenwich, Conn. 'It's hard to imagine stocks not reacting negatively and the question is how much.'
Jack McIntyre, portfolio manager for global fixed income at Brandywine Global Investment Management in Philadelphia, said it was uncertain whether U.S. Treasuries would rally after the U.S. attack, largely due to the market's hypersensitivity to inflation.
'This could lead to regime change (which) ultimately could have a much bigger impact on the global economy if Iran shifts towards a more friendly, open economic regime,' said McIntyre.