Global investors are bracing for significant market turmoil when trading reopens, with analysts predicting a sharp spike in oil prices and a flight to safe-haven assets following the United States' announcement of military strikes against three Iranian nuclear facilities.
The attack, which U.S. President Donald Trump described as a "spectacular military success," deepens American involvement in the Middle East conflict and introduces a significant new layer of risk into a global economy already facing headwinds. Analysts warn that the immediate market reaction could include a sell-off in equities and a surge in the value of the U.S. dollar as uncertainty prevails.
"I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital. "I think the uncertainty is going to blanket the markets."
The primary concern gripping markets is the potential for soaring energy costs to fuel global inflation, which could in turn sap consumer confidence and reduce the likelihood of interest rate cuts by central banks. "This is definitely going to have an impact on energy prices and potentially on inflation as well," said Jack Ablin, chief investment officer of Cresset Capital.
Prior to the attack, analysts at Oxford Economics had modeled a severe-case scenario in which a shutdown of Iranian oil production could drive global oil prices to around $130 per barrel, pushing U.S. inflation near 6% by the end of the year. Such a shock, they noted, would likely "ruin any chance of rate cuts in the U.S. this year."
However, historical precedent suggests any initial market pullback could be short-lived. According to data from Wedbush Securities, the S&P 500 has, on average, recovered and traded higher in the months following major Middle East conflicts. Some analysts believe the U.S. action could force a diplomatic resolution. Jamie Cox, managing partner at Harris Financial Group, suggested that with Iran's nuclear capabilities neutralized, the nation may "hit the escape button to a peace deal," which could stabilize prices after an initial spike.
For now, caution is the prevailing sentiment. "Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger," said Steve Sosnick, chief market strategist at IBKR. "It’s hard to imagine stocks not reacting negatively and the question is how much. It will depend on Iranian reaction and whether oil prices spike."
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