Oil prices quickly rose and global markets fell Friday following news that Israel had launched retaliatory strikes against Iran, increasing investments regarded safer, such as gold.
Iran’s state television reported explosions in the central province of Isfahan on Friday, while US media quoted authorities as suggesting Israel had launched retaliation strikes against its archrival.
“Asian markets bore the brunt of the breaking news of Israel’s retaliatory attack on Iran, which also sent Dow futures sharply lower and caused further spikes in gold and oil prices,” remarked Richard Hunter, head of markets at Interactive Investor.
“US markets will not have the opportunity to react directly to the developments until later, but the escalation will put pressure on the main indices, which were already lining up for a weekly drop.”
Crude oil prices fell after initially rising as much as four percent on concerns over supplies from the oil-rich region.
The yen rallied against the dollar, and gold reclaimed its previous high of $2,400 per ounce, while the Swiss franc and US government bonds gained strength.
Israel had warned it would respond after Iran fired hundreds of missiles and drones at Israel over a week ago in revenge for a deadly strike that destroyed Iran’s consular annex at its embassy in Syria, which Tehran blamed on its adversary.
Fears of a big regional spillover from Israel’s battle in Gaza against Iran-backed Palestinian terrorists have subsequently risen. On Friday, world leaders renewed calls for de-escalation.
There had been no comment from Israeli or Iranian officials, and the amount of the damage was unclear.
Traders were already pessimistic as they considered the possibility of the Federal Reserve keeping interest rates unchanged this year after data showed jobless claims fell short of expectations while an indicator of corporate activity rose to a two-year high.
Atlanta Fed President Raphael Bostic stated that inflation is “too high” and that there is no need to lower borrowing prices until later this year.
New York Fed President John Williams and Governor Michelle Bowman both stated that they expected fewer reductions than expected this year, if any.
Key figures around 1100 GMT
West Texas Intermediate: DOWN 0.6 percent at $82.26 per barrel
Brent North Sea Crude: DOWN 0.5 percent at $86.65 per barrel
London – FTSE 100: UP 0.2 percent at 7,864.67 points
Paris – CAC 40: UP 0.4 percent at 8,015.39
Frankfurt – DAX: FLAT at 17,777.20
EURO STOXX 50: UP 0.4 percent at 4,932.66
Tokyo – Nikkei 225: DOWN 2.7 percent at 37,068.35 (close)
Hong Kong – Hang Seng Index: DOWN 1.0 percent at 16,224.14 (close)
Shanghai – Composite: DOWN 0.3 percent at 3,065.26 (close)
New York – Dow: UP 0.1 percent at 37,775.38 (close)
Dollar/yen: DOWN at 154.52 yen from 154.67 yen on Thursday
Euro/dollar: UP at $1.0650 from $1.0645
Pound/dollar: DOWN at $1.2435 from $1.2438
Euro/pound: UP at 85.62 pence from 85.57 pence.