Volatility to stay as Iran-Israel tension escalates

Global equities took a hit on Friday amid escalating Middle East tensions. Middle East tensions have already rattled global markets this month and Friday’s escalation is expected to cause much worse. Tensions in the Middle East escalated Friday Morning as reports emerged of an Israeli Military strike near Isfahan in Iran in a retaliatory response to recent rocket and missile attacks. In response to the news, Gold, silver, and oil prices bounced while US bond yields, Bitcoin, US stock futures and global stocks fell sharply early Friday.

However, the markets recovered partially, and tension slightly reduced now after Iranian authorities downplayed the seriousness of the situation. An Iranian official revealed that Iran will not immediately retaliate against recent Israeli strikes. The International Atomic Energy Agency (IAEA) also confirmed that there has been no damage to Iran’s nuclear facilities following the attack.

Markets react to the Middle east crisis

Here’s an overview of what’s happening, and the effect on the global market.

The Middle East conflict is epitomised by uncertainty and unrest which is a core factor in pushing up the value of gold. Many market participants and investors consider safe-haven assets the ‘go-to’ investment vehicles in times of turmoil. The gold price has sharply risen, surpassing the $2400 per ounce mark once again Friday Morning, supported by strong demand from investors seeking a safe haven. Prices of other precious metals, including silver, have also risen sharply since March 2024.

Crude oil prices will be another key watch. Oil prices jumped more than 3% with global benchmark Brent crude futures crossing $90 a barrel during the Asian session after early reports of explosions in Iran. The potential for a regional war in the Middle East has made energy prices volatile over investor fears that conflict between Iran and Israel could disrupt supplies. Note that Iran has the third-largest oil reserves and the 2nd largest natural gas reserves in the world.

In terms of crypto and global equity markets, risk assets such as stocks and Bitcoin plummeted in the Asian session. The increasing escalation between Israel and Iran was responded negatively by stock exchanges across the world. As of this writing, both Bitcoin and stocks manage marginal recovery following the latest Israel-Iran blowup.

Conclusion

Moving ahead to the weekend, the result so far is that financial markets seem relatively calm in the second half of the European session after a nervous Asian trading session, which should give investors a tad of confidence. However, global markets will certainly remain volatile over the next few weeks with tensions further fueled by Iran’s warnings against attacks on its nuclear sites. Iran’s Islamic Revolutionary Guard Corps (IRGC) has warned that it would attack Israel’s nuclear sites if the country strikes at Iran’s nuclear facilities. Therefore, we recommend that investors and traders maintain a calm stance trade very cautiously and try to build a diversified portfolio that is enough to navigate the Middle East tensions.