The US enters Israeli-Iran conflict and attacks three Iranian nuclear sites
President Donald Trump said on Saturday that US forces have attacked three Iranian locations, taking part in the effort to behead Israel’s nuclear program with dangerous gambits, weakening longtime enemies amid the threat of lepractics that could cause conflict in the wider region.
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- The US attack on Iran’s nuclear site is expected to trigger a market response, causing rising oil prices and strengthening the US dollar.
- Rising oil prices can lead to increased inflation and lower consumer confidence, which could affect interest rate cuts.
- Market uncertainty remains high due to limited information on the extent of the damages of the conflict and future developments.
NEW YORK – The US attack on Iran’s nuclear power plants on Saturday could trigger a knee response in global markets when it resumes, and could trigger a high oil price and rush to safety, investors said they assessed how the latest escalation of tensions ripples over the global economy.
The attack, released by President Donald Trump on the Truth Social of Social Media Sites, has deepened his involvement in the Middle East conflict. It was a problem that investors went to over the weekend when they were pondering hosts of different market scenarios.
Shortly after the announcement, they predicted that US involvement would likely lead to the sale of shares and lead to a potential bid for dollars and other safe assets when the transaction begins, but said there was still a lot of uncertainty about the process of the conflict.
Trump called the attack “successful” but little details were known. He was expected to address the country later on Saturday.
“I think the market will be wary at first, and oil will open higher,” said Mark Spindel, chief investment officer at Potomac River Capital.
“We don’t have a damage rating and it will take some time. We’re engaged, despite him describing this as ‘finished’. Spindel said.
“I think uncertainty will encompass the market as Americans are now exposed everywhere. It will increase uncertainty and volatility, especially in oil,” he added.
However, Spindel said he has time to digest the news before the market opens, and he has made arrangements to talk to other market participants.
How do oil prices and inflation affect them?
The key market concerns center on the potential impact of Middle Eastern development on oil prices and inflation. Rising inflation could weaken consumer confidence and reduce the likelihood of short-term interest rate reductions.
“This adds a complex new layer of risk that we must consider and pay attention to,” said Jack Ablin, chief investment officer at Cresset Capital. “This will definitely affect energy prices and potentially affect inflation.”
Global benchmark Brent crude futures rose 18% since June 10, reaching a high of nearly $79.04 on Thursday, but the S&P 500 had little change following the initial decline in Israel’s attack on Iran on June 13.
Before the US attacked on Saturday, Oxford Economics analysts modeled three scenarios, including the elimination of conflict, the complete closure of Iran’s oil production and the closure of the Strait of Hormuz.
In the most severe cases, global oil prices jumped to around $130 per barrel, driving nearly 6% inflation by the end of the year, Oxford said in a memo.
“Price shocks inevitably weaken consumer spending due to actual revenue blows, but it says the magnitude of concerns about rising inflation and the potential for a second round of inflation effects is likely to undermine the possibility of interest rate cuts in the US this year.
In comments after the announcement Saturday, Harris Financial Group’s managing partner Jamie Cox agreed that crude oil prices are likely to surge in the first news. However, Cox said he expects prices to level in a few days in a few days, as the attack allows Iran to seek a peace deal with Israel and the United States.
“This demonstration of force and the complete disappearance of its nuclear capabilities will result in them losing all leverage and pushing the escape button up to the peace agreement,” Cox said.
Economists warn that dramatic rises in oil prices could undermine the already tense global economy due to Trump’s tariffs.
Still, stock pullbacks can be fleeting, history suggests. In notable examples of the past where tensions in the Middle Eastern surged, such as the 2003 invasion of Iraq and the 2019 attack on Saudi oil facilities, stocks initially declined but quickly recovered.
According to data from Wedbush Securities and Capiq Pro, the S&P 500 slipped 0.3% 0.3% in the three weeks since the start of the conflict, but was 2.3% higher in the average post-conflict two months.
What does this mean for the US dollar?
Dispute escalation can affect US dollars mixed in US dollars. This fell this year amid concerns over a decline in US exceptionalism.
If they are directly involved in the Iran-Israel war, the dollar could initially benefit from a security bid, analysts said.
“We’re looking forward to seeing you in the process of exploring the world,” said Steve Sosnick, chief market strategist at IBKR in Greenwich, Connecticut. “It’s hard to imagine a stock not responding negatively. The question is how much volume it is. It depends on Iran’s reaction and whether crude oil prices will skyrocket.”
(Reporting by Saqib Iqbal Ahmed, Lewis Krauskopf, Suzanne McGee, and Saeed Azhar, Editing by Megan Davies, Diane Craft, Peter Henderson, Marguerita Choy, and Jamie Freed)
