Oil prices surged, gold neared its record high, and stock markets fell on Friday, following escalating geopolitical tensions in the Middle East after Israel conducted airstrikes on nuclear and military facilities in Iran.
Iran, one of the world’s top ten oil producers, could disrupt global oil supply if conflict arises in the Gulf, potentially affecting a major maritime route and impacting roughly a quarter of the world’s oil production, according to Ricardo Evangelista, a financial analyst at ActivTrades.
Soaring oil prices
Oil prices soared on Friday in anticipation of reduced supply. The North American WTI crude oil price increased by over 12% overnight, and by 1:40 p.m. GMT, it was still up 7.23% at $73.29 a barrel. Brent crude from the North Sea rose by 7.22% to $74.37.
On the currency market, the US dollar, in which oil is priced, strengthened by 0.70% against the euro, standing at €1.1505 per dollar. The Israeli shekel fell by 0.93% against the dollar, trading at 4.1584 shekels per dollar.
The geopolitical tensions between Iran and Israel have driven investors to seek safe-haven assets. Gold, a primary safe-haven asset, climbed 1.71% to $3,443 an ounce, approaching its last record of $3,500, achieved in April.
Stock market slump
In contrast, stock markets slumped.
On Wall Street, the Dow Jones had fallen by 1.13% by 1:40 p.m. GMT; the Nasdaq dropped 1.08%, and the S&P 500 was down 0.88%.
In Europe, Paris lost 0.96%, Frankfurt 1.11%, Milan 1.23%, and London 0.20%. In Asia, Hong Kong dropped 0.57%, Shenzhen 1.10%, and Shanghai 0.75%. Tokyo lost 0.89%, Seoul 0.87%, and Taipei 0.96%.
“The focus is now on how Iran might retaliate,” commented Jim Reid, an economist at Deutsche Bank.
Fears of open warfare
Iran’s Foreign Ministry called the attack a “declaration of war” and urged the UN Security Council to respond. Tehran’s military warned of “no limits” in their counterattack.
US President Donald Trump urged Tehran on Friday to “make a deal before there’s nothing left,” warning that the “next attacks” would be “even more brutal.”
“This situation could potentially escalate into open warfare, with unpredictable consequences for the Gulf region,” Ricardo Evangelista assessed.
Investors likely to reduce risk exposure
Local media reported new explosions at midday in Iran, with a reported strike on the Natanz uranium enrichment plant and a fire at Tabriz Airport.
A strong retaliation by Tehran against Israel could redefine macroeconomic scenarios for the rest of the year, according to Stephen Innes of SPI Asset Management. He noted that escalating tensions could have global implications.
Whatever happens, many investors may likely reduce their risk exposure ahead of a potentially highly volatile geopolitical weekend, Ipek Ozkardeskaya, an analyst at Swissquote Bank, predicted.
Oil stocks rise, bonds remain stable
Oil stocks rose on Friday with the surge in oil prices. In Paris, TotalEnergies gained 1.22%; in London, BP rose 2.90% and Shell 2.10%.
On Wall Street, Exxon Mobil increased by 1.32% and Chevron by 0.70%.
In the bond market, government bond yields remained stable, unaffected by the uncertainty. By 1:40 p.m. GMT, the US ten-year bond yield reached 4.38%, up from 4.36% at the previous day’s close, while its German counterpart, a European benchmark, stood at 2.49%, compared to 2.47% the day before.
