New York (TDI): Tensions in the Middle East have escalated dramatically after US strikes on Iranian nuclear facilities, a move that investors fear could push global oil prices higher and trigger widespread unease across financial markets.
While trading remained calm in some Gulf markets on Sunday, with Saudi Arabia, Qatar, and Kuwait showing little movement, analysts say the full reaction won’t be felt until global exchanges open. Interestingly, Israel’s Tel Aviv index climbed to a record, seemingly brushing off the overnight chaos.
But market watchers are warning not to read too much into the early calm. The concern is twofold: energy prices and uncertainty. Crude oil has already seen a strong rally, with Brent climbing nearly 18% since June 10 and briefly touching $79 a barrel. The S&P 500, by contrast, has barely budged, perhaps due to cautious optimism or wait-and-see attitudes, Reuters reported.
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Cryptos, often a sentiment indicator, painted a different picture. Ether dropped 8.5% on Sunday, extending its decline since June 13, the day Israeli strikes on Iran began.
One of the biggest concerns lies in the potential impact on oil flow through the Strait of Hormuz, a narrow but crucial waterway bordering Iran and Oman, responsible for transporting a significant share of the world’s oil supply. Any disruption there could send prices soaring.
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Such a price surge would likely ripple out to consumers, potentially lifting inflation and putting pressure on central banks already hesitant about rate cuts.
For now, the situation is fluid. Much depends on Iran’s response in the coming hours, and whether cooler heads can prevent a broader regional conflict. But markets, as always, will price in the fear long before the facts are fully known.
Farkhund Yousafzai is an Associate Editor at The Diplomatic Insight.
