Financial Markets On Edge As Oil And Gold Prices Could Soar Amid Rising Israel-Iran Tensions

Zinger Key Points
  • Iran's weekend attack on Israel heightens fears of wider Middle East conflict.
  • Investors turn to gold, treasuries and the dollar as safe-haven assets amid uncertainty.

As the new week approaches, the financial markets are bracing for increased uncertainty, especially with the recent unprecedented attack by Iran on Israel.

This development has heightened concerns about potential retaliatory actions, adding another layer of complexity for investors already navigating the challenges of persistent inflation and the anticipation of sustained high-interest rates.

Bloomberg reported that the escalation of the Middle East crisis is anticipated to bring additional volatility to the trading landscape.

Amidst the uncertainty, gold has surged to record highs, while the U.S. dollar has strengthened, reflecting the shift towards more stable investments during geopolitical turmoil.

Last year in October, when Hamas launched attacks on Israel, the underlying worry among market players was Iran's possible involvement.

With the conflict expanding, predictions are circulating that oil prices might breach the $100 mark, while safe-haven assets like treasuries, gold and the dollar may see increased demand amidst further declines in the stock market.

Despite the potential for heightened market anxiety, Iran's assertion that it considers the incident closed, coupled with reports of President Joe Biden advising against an Israeli counterstrike, could moderate reactions. According to Patrick Armstrong, Plurimi Wealth LLP's Chief Investment Officer, the market's focus might shift towards safer assets, with the outcome heavily influenced by Israel's next move.

“Investors’ natural reaction is to look for safe-haven assets in moments like this,” Armstrong told the outlet. “Reactions will be somewhat dependent on Israel’s response. If Israel does not escalate from here, it may provide an opportunity to buy risk assets at lower prices.”

Also Read: Iran's Drone Strike Expected To Drive Oil Prices Up As Market Braces For Israel's Response

The immediate market response was visible in Bitcoin's performance, which saw a nearly 9% drop following the attack, only to recover the next day, signaling mixed investor sentiment.

Furthermore, Middle Eastern stock markets, including those in Israel, Saudi Arabia and Qatar, experienced slight declines following the attack.

According to Emre Akcakmak, a Dubai-based senior consultant at East Capital, the markets opened relatively calm, interpreting Iran’s actions as measured retaliation, Bloomberg reported. 

Nevertheless, the broader implications of global inflation, driven by potential increases in oil and energy prices, remain a concern for investors worldwide.

As tensions mount, the potential for an ongoing cycle of strikes and counterstrikes could keep investors on edge, with many looking towards the oil market for direction.

With Brent crude already seeing significant increases this year, any further conflict threatening oil shipments could have widespread implications for the Middle East and globally.

Global markets are already feeling the impact of these developments, with the S&P 500 experiencing its largest weekly drop since October, driven by inflation worries and lackluster bank earnings.

The upcoming week will be crucial as investors assess the situation and its potential effects on energy costs, inflation, and interest rates.

Now Read: Crypto Markets Tumble Following Iran's Drone Attack Against Israel, Investor Warns Of Continued Selloff

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock

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