Equities Fell, Oil Rises as Israel Hits Iran – Asia Market Wrap

Stocks plummeted along with equity-index futures, as investors flocked to haven assets after Israel targeted Iran’s nuclear programme installations, escalating Middle Eastern tensions significantly. Crude oil surged 9%, the largest increase in more than three years.

Contracts for the S&P 500 index fell 1.6%, while an index of Asian equities fell 1.1%. Treasuries rose, as the 10-year yield fell one basis point to 4.34%. Gold soared as cryptocurrencies fell. A dollar index recovered 0.4% after initially dipping, boosted by a shift to safer currencies despite recent concerns about the currency’s trustworthiness. The currency had fallen to a three-year low on Thursday.

The bombings on Iran’s nuclear programme and ballistic missile installations reignited a standoff between the two rivals, which risks escalating into a larger battle. While the market reaction was strongest in crude oil, changes in other areas of the market suggested that investors are keeping an eye on how long the tensions will remain and whether the situation would worsen.

Israel stated that the operation will continue for “as many days” as it takes to eliminate the threat, and Iran promised to retaliate “harshly.” The move followed repeated warnings from Israeli Prime Minister Netanyahu about hitting Iran and damaging its nuclear programme. Iran had previously stated that it would open a new uranium enrichment facility in response to the UN atomic watchdog’s condemnation of its nuclear programme.

The oil futures curve rose on concerns that Israel’s recent strike on Iran will have serious and long-term consequences. The most visible market impact was in energy, as Iran is a significant exporter of petroleum to China and India. Other sectors saw more modest moves as investors braced for a harsher selloff.