Israel launched airstrikes on Iran on Friday, causing stocks to tumble and oil prices to surge. The Dow Jones fell 769.83 points, or 1.79%, ending at 42,197.79. The Nasdaq dropped 1.13% to close at 5,976.97, while the S&P 500 lost 1.30%, settling at 19,406.83.
The market downturn began Thursday evening after Israel’s Defense Minister, Israel Katz, declared a special state of emergency. U.S. officials emphasized that there is no U.S. involvement or assistance in the conflict. The situation worsened on Friday as the Israel Defense Forces reported that Iran launched retaliatory missiles towards Tel Aviv.
The geopolitical unrest pushed oil prices higher, with futures surging more than 7% and West Texas Intermediate crude nearing $74 per barrel. Gold prices also climbed, driven by demand for safe-haven assets. “This conflict adds challenges to an already extensive list of market worries.
The spike in crude, if sustained, will have immediate impacts on inflation numbers,” said Mark Malek, Chief Investment Officer at Siebert Financial. President Donald Trump addressed the situation in a post on his social media site, Truth Social, urging Iran to negotiate. “There has already been great death and destruction, but there is still time to end this conflict.
Iran must make a deal, before there is nothing left,” Trump wrote. Trump also stated he gave Iran a 60-day ultimatum to reach a nuclear agreement, which expired today.
Israel-Iran conflict impacts global markets
A closely watched University of Michigan survey released Friday showed improved consumer sentiment. The university’s Survey of Consumers rose to 60.5 in June, significantly higher than the expected 54 and a 15.9% increase from the previous month. As Israel and Iran escalate from conflict to war, the price of oil is rising, which could significantly impact the cost of goods globally, particularly in Asian nations.
Energy and fuel costs, food prices, and spending on infrastructure and welfare programs are all likely to be affected, says a leading economics researcher, with consumers across Asia expected to see higher prices. “For Asian nations, there is no real alternative to oil from the Gulf states, meaning volatility in that region is likely to cause pressure thousands of kilometres away,” said Joaquin Vespignani, associate professor in finance at the University of Tasmania. “For the average person, inflation will increase significantly while income may decline, creating a double whammy.”
Prices have already surged following the US bombing of an Iranian nuclear site.
A squeeze on oil supplies could have serious ramifications for countries such as Indonesia, which have provided fuel subsidies. The spike in oil prices may soon stall and reverse course if the Israel-Iran conflict does not widen, according to historical data examined by TD Securities. Daniel Ghali, a senior commodity strategist at the firm, stated in a note to clients that the initial moves in oil markets already put this week’s developments on par with the average comparable event since the 1980s.
“Historically, geopolitical risks typically faded within one month and completely evaporated within six months, in line with subsequent macroeconomic headwinds and deployment of spare capacity. Expanded wars (including those involving the USA) have a more significant impact,” Ghali said. What happens over the weekend could play a significant role in whether the spike in oil continues.
Oil prices moved higher intraday Friday after Iran launched retaliatory missiles toward Israel. Traders are particularly concerned about potential damage to oil infrastructure, such as production platforms, pipelines, or refineries, in any exchanges between the two nations.
