Global financial and commodity markets experienced notable upheaval following Israel’s strike on Iran early Friday. Petroleum prices surged by over 10%, equity markets showed declines, and investors sought refuge in customary safe-haven assets like gold and bonds, a typical reaction to geopolitical instability, particularly in the middle East.

West Texas Intermediate (WTI) crude oil futures for July delivery, traded in Chicago, spiked nearly 15%, exceeding $9 per barrel to reach approximately $77.5 per barrel-the highest price in almost a year,before slightly retracting. Brent crude, the European benchmark, also jumped by more than 13%, hitting $78.5 per barrel.

Oil prices are on track for their most significant weekly gain as 2022, driven by renewed Middle East tensions. This surge erases year-to-date losses previously caused by slowing global growth due to trade frictions and OPEC’s decision to reactivate dormant production capacity faster than anticipated. The over 30% increase in oil prices since last month’s low threatens to increase gasoline costs and exacerbate inflationary pressures, especially as tariff-related price pressures intensify.

Gold Reaches New Highs

Gold, a classic safe-haven asset during times of uncertainty, rose by over 1%, reaching a new record high near $3,450 per ounce.

“Any indication of reprisals or interruption of the supply would maintain high volatility and pushed oil and shelter assets,”

Stock Markets React Negatively

Stock market futures declined in response to the attack. S&P 500 futures fell by about 1.8% shortly after reports of Israel’s strikes on Iranian targets, while NASDAQ futures dropped by over 2%. Eurostoxx index futures, representing European stocks, decreased by 1.8%. Asian stock markets also opened with losses.

The dollar’s appeal as a safe-haven currency has diminished, partly due to recent economic and trade policies. The swiss Franc and Japanese Yen saw the most significant gains following the attack. The dollar is near a three-year low, initially weakening after the news before slightly recovering.

The Israeli attack elevates the geopolitical risk premium and poses a threat to the stability of the crude oil market. Market movements will largely depend on assessments of the attack’s scope and Iran’s response. Investors are likely to remain cautious, moving away from riskier assets and seeking safer investments. Cryptocurrency prices also declined.

Washington has distanced itself from the attack and assured Iran that it does not target US interests in any retaliation. Negotiations between the United states and Iran, scheduled for a sixth round in Oman on Sunday to discuss the Iranian nuclear program, are now uncertain following the Israeli attack. The president of the United States, Donald Trump, recently expressed diminished confidence in reaching an agreement.