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Tensions Rise Between Israel and Iran
Oil prices experienced significant spikes, stock markets declined, and investors shifted towards safer assets like gold on Friday as tensions escalated between Israel and Iran, raising fears of a larger regional conflict.
Oil Prices Surge
Oil prices saw their largest single-day increase in years on Friday following Israel’s airstrikes on Iran, which heightened concerns over potential energy supply disruptions linked to a wider Middle Eastern conflict.
Market Reactions
US oil rose by 7.26%, settling at approximately $72.98 per barrel, while Brent crude also climbed 7%, reaching around $74.23 per barrel. Earlier in the day, both oil types had surged by as much as 14% and 13%, respectively.
Investor Behavior
The surge marked the largest one-day increase for oil prices since March 2022, following Russia’s invasion of Ukraine. The oil benchmarks experienced their biggest weekly gains since October 2022. Ahmad Assiri, a research strategist at Pepperstone, noted that this spike reflects both immediate supply concerns and a heightened sense of uncertainty regarding potential escalations in the conflict.
Stock Market Impact
Meanwhile, US stock markets fell, prompting investors to turn to traditional safe havens like gold, which rose approximately 1.4% to $3,433 per ounce. The Dow Jones Industrial Average fell by 770 points, or 1.79%, after reports of Iran’s retaliation. Both the S&P 500 and the Nasdaq Composite dropped by 1.13% and 1.3%, respectively.
Geopolitical Concerns
With reports indicating that Iran fired hundreds of missiles at Israel, the volatility in stocks increased sharply, and Wall Street’s fear gauge, the CBOE Volatility Index, jumped by 19%. Shares in airlines and travel companies declined, while defense contractors saw gains amid the turmoil.
Potential Economic Fallout
There are rising concerns about how Iran’s possible military responses could impact global oil supply and prices. Analysts warn that if Iranian oil is removed from the market, prices could increase significantly. The Federal Reserve is also cautious about rising energy prices potentially igniting inflation, complicating economic policy discussions.
