On Saturday, the United States and Israel struck targets in Iran, rattling energy traders and raising fears that any escalation could choke flows through the Strait of Hormuz, a key route for global crude. President Donald Trump framed the campaign as major combat operations aimed at crushing Iran’s military capacity and ending what he called an imminent threat tied to Tehran’s nuclear ambitions.
As per the report by Reuters, the strikes targeted Iran’s leadership and were followed by Iranian missiles launched toward Israel, putting nearby Gulf oil producers on alert. Some major oil companies and leading trading houses paused crude and fuel movements through the Hormuz corridor after the attacks.
Trump tied the operation to what he described as a refusal by Tehran to accept a negotiated outcome in nuclear talks, saying he had not reached a “final decision” as recently as Friday. He also pointed to last June’s Operation Midnight Hammer, saying it “obliterated” three nuclear sites and that Washington had warned Iran against rebuilding its program.
Escalating Conflict Could Spike Oil Prices
Trump said the U.S. military had begun “major combat operations” and argued Iran “can never have a nuclear weapon,” casting the strikes as a preemptive move rather than a limited response. He also said the U.S. objective included dismantling Tehran’s missile capabilities and its network of armed proxies.
That political messaging lands directly on the oil market’s pressure point: Iran sits across from the Arabian Peninsula at the Strait of Hormuz, where roughly 20% of world oil supply transits, according to the report. Meanwhile, on Friday the Brent settled near $73 a barrel and was already up about 20% for the year.
As per the outlet, Capital Economics’ William Jackson wrote that even if hostilities remain contained, Brent could move toward $80, a level seen during last June’s 12-day conflict. He also warned that a longer disruption that bites into supply could lift prices toward $100 and add about 0.6 to 0.7 percentage points to global inflation.
How Will Markets Respond To Geopolitical Tensions?
Beyond crude, the Reuters report said investors should brace for bigger swings across markets that have already been jumpy in 2026, citing tariff-driven turbulence and a steep tech selloff. The VIX volatility gauge has climbed about a third this year, while the MOVE index tied to U.S. rate volatility is up 15%, the report said.
Currency moves could hinge on whether oil supply is hit, with Commonwealth Bank of Australia analysts noting the dollar dipped about 1% during last June’s war but recovered within days, according to Reuters. The same analysts said a longer conflict that squeezes supply could support the dollar versus most currencies, while the yen and Swiss franc could hold up better.
Israel’s shekel is another market to watch as reported by the outlet, which noted it has reacted sharply to prior flare-ups before rebounding quickly. JPMorgan cautioned the pattern could break if risk premiums stay elevated, especially if fighting expands to include heavier action against Iran-aligned groups, Reuters said.
Trump also warned civilians that “bombs will be dropping everywhere” as operations continued, while urging Iranians to “take over your government” after the fighting. Iran’s Islamic Revolutionary Guard Corps said it launched a first large-scale wave of missile and drone retaliation toward Israel.
Geopolitical Risk: Historical Market Reactions
The current escalation in U.S.-Iran tensions has historically injected volatility into financial markets, as seen when major indexes dropped amid fears of military escalation.
For instance, the S&P 500 and Nasdaq often experience short-term losses under such circumstances, reflecting the uncertainty surrounding military actions and their potential impact on oil supply, given that Iran is a significant player in the global oil market.
Whenever geopolitical risk rises, it can lead to mixed outcomes across various sectors, with energy often benefiting from rising prices, while technology and travel sectors may suffer due to inflation concerns and increased operational costs.
Safe-Haven Assets Set For Renewed Demand
In Singapore, OCBC strategist Christopher Wong told Reuters, “The strike raises geopolitical risk premia as markets head into Monday’s open,” adding that gold could gap higher and oil could firm on supply fears. Wong also warned of volatility for risk assets and higher-beta currencies if headlines point to wider spillovers.
Reuters said the Swiss franc, up about 3% against the dollar this year, could face more upward pressure, complicating matters for the Swiss National Bank. The report also pointed to gold’s 22% gain so far in 2026, strength in silver, and potential demand for U.S. Treasuries as yields have drifted lower in recent weeks.
Bitcoin has not behaved like a shelter asset in the latest shock, falling 2% on Saturday and dropping more than 25% over the past two months, Reuters said. Vantage Point Asset Management CIO Nick Ferres said, “Energy is still inexpensive. That’s the obvious sector that rallies on Monday. And gold.”
Middle East trading when exchanges reopen will offer an early read on risk appetite, with Saudi Arabia and Qatar among the first markets to react. The outlet quoted Neovision Wealth Management CEO Ryan Lemand saying, “I suspect markets will be down if these hostilities continue through the day.”
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