2 days ago
Stocks sell off, oil surges as Israel strikes Iran
SINGAPORE/LONDON (Reuters) -Israel launched large-scale strikes against Iran on Friday, saying it had attacked nuclear facilities and missile factories and killed a swathe of military commanders in what could be a prolonged operation to prevent Tehran building an atomic weapon.
U.S. President Donald Trump suggested that Iran had brought the attack on itself by resisting U.S. demands in talks to restrict its nuclear programme, and urged it to make a deal, "with the next already planned attacks being even more brutal".
Washington said it had no part in the operation, however.
MARKET REACTION: U.S. stock futures fell 1.5%, oil prices jumped and gold rallied. The U.S. dollar rallied.
QUOTES:
JAMES ROSSITER, HEAD OF GLOBAL MACRO STRATEGY, TD SECURITIES, LONDON:
"This is a flight-to-safety event. But markets are struggling a bit and in the fixed income space you have an oil-price shock that is inflationary and so you should see markets expecting an even more hawkish Fed. On the other hand, you have the flight-to-safety, which should push bond yields lower."
"On the dollar side, it seems like a cleaner move."
"The U.S. was very quick to come and say 'this (the Israeli strike) has nothing to do with us' and then we have Trump's comments. He's still clearly pushing for the Iranian to talk. There are these talks that have been scheduled for Sunday."
MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE:
"Israel's 'pre-emptive' strike on Iran has sent volatility surging during Asian trade on Friday. Traders are now on edge over the prospects of a full-blown Middle East conflict, given Iran had already warned it would target Israel's nuclear facilities if attacked first.
"It's now a question of when Iran will respond, not if. And that will keep uncertainty high and volatility elevated.
""Crude oil has since broken above its June 2022 bearish trendline, with a move to the highs around $78 or even the $80 now within easy reach. The question now is whether this is a typical geopolitical knee-jerk reaction from markets, which results in lots of hype with no delivery. Or if the US really is on the brink of navigating a Middle East war."
CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE:
"USD rebounded this morning, alongside other safe-haven proxies, including CHF, JPY and gold on geopolitical escalation. Not surprisingly, risk proxies including AUD, KRW traded on the backfoot. Geopolitical noises may temporarily distort USD downtrend and temporarily weigh on risk proxies especially heading into the weekend."
JESSICA AMIR, MARKET STRATEGIST, ONLINE TRADING PLATFORM MOOMOO, SYDNEY:
'We've seen equities stalling for some time, and it just appears that this is the catalyst that will probably send equities down lower. Stocks are up 30% globally, and you've got the MSCI World Index at a record, so there's room for fat to be taken off the table.
'What's going to continue to soar higher is, obviously, the defensive sectors, so utilities, energy, and also defence (companies) themselves.
'The (Middle East) region is a huge supplier of oil and obviously there's now the thinking that some of that supply could be cut off at a time when we've got demand really starting to pick up.'
HIROFUMI SUZUKI, CHIEF FX STRATEGIST, SMBC, TOKYO:
"The situation in the Middle East has further deteriorated, and the heightened geopolitical risks are being strongly felt in the FX market. With the rise in risk-off sentiment, the Japanese yen is likely to be bought. The USD/JPY exchange rate is seeing the 140 yen level, observed in April, as a potential support level."
TONY SYCAMORE, ANALYST, IG, SYDNEY:
"I thought Israel might give Iran the benefit of the doubt ahead of weekend talks with the U.S., but they've obviously decided to go it alone.
"While details are sparse regarding the targets, risk asset markets are not in the mood to wait and find out.
"This morning's alarming escalation is a blow to risk sentiment and comes at a crucial time after macro and systematic funds have rebuilt long positions and investor sentiment has rebounded to bullish levels. While we await further news and a potential response from Iran, we are likely to see a further deterioration in risk sentiment as traders cut risk seeking positions ahead of the weekend."
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO:
"Traders are scurrying for safety as reports of a strike on Iran cross the wires, but details on the scale and magnitude of the attack remain scarce and moves have been relatively limited thus far."
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:
"The geopolitical escalation adds another layer of uncertainty to already fragile sentiment.
"The key question now is whether this marks a brief flare-up or the beginning of broader regional escalation. If the situation de-escalates quickly, markets may retrace some of the initial moves. But if tensions rise — particularly with any threat to oil supply routes — the risk-off mood could persist, keeping upward pressure on crude and haven assets."
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