US President Donald Trump said on social media Tuesday that the US military had “Successfully struck” three Iranian nuclear facilities.
How will this emergency affect global markets? Crude Oil, gold, U. S. stock three major assets will deduce how?
Crude oil may continue to surge
Crude oil is one of the most reactive assets since the Israeli-iraqi conflict, with Brent Crude futures up 18 per cent since June 10 and hitting a near five-month high of $79.04 on Thursday.
Since the outbreak of the conflict, hedge funds have ramped up their bullish bets on Brent Crude at the fastest rate since early October.
In the week to June 17, fund managers increased their net long positions in the Brent Crude by 76,253 to 273175, the biggest increase in eight months, according to data from ICE Futures Europe. Meanwhile, pure short positions fell to their lowest level in more than four months.
Traders may be hedging against a wider conflict in the Middle East or blocked shipments in the Strait of Hormuz.
In an extreme risk scenario, international oil prices could surge well above $100 a barrel in the event of a prolonged blockade of the Strait of Hormuz, Goldman Sachs predicted.
“Tensions in the Middle East are raising concerns about supply disruptions, otherwise the fundamental outlook for crude oil would be far from bullish given the OPEC + production increase and weak demand growth,” said Fawad Razaqzada, senior analyst at Goldman Sachs, the current rise in oil prices is driven by concerns about possible supply disruptions in the Strait of Hormuz, “In fact, Iran has warned before, especially if the US gets involved. If Tehran blocks the channel that holds about 20 percent of the world’s daily oil demand, oil prices could soar even higher — perhaps even into the triple digits. Of course, it is not certain that things will get this bad.”
On June 22, CCTV News reported that Kuussaari, a member of the National Security Committee of the Iranian Parliament, said that the Iranian parliament had concluded that the Strait of Hormuz should be closed, but the final decision rests with Iran’s Supreme National Security Council.
The consensus view is that crude prices will continue to surge.
Mark Spindel, Chief Investment Officer of Potomac River Capital, said there would be“Panic buying” in the early stages of the market, pushing up oil prices and increased uncertainty would increase volatility in the overall market, particularly in the oil sector.
Jack Ablin, chief investment officer at Cresset Capital, warned that the incident introduced new geopolitical risks that could push up energy prices and Stoke inflationary pressures.
A new report by Michael Hartnett, Chief Strategist at Bank of America, points out that even a US military action against Iran would be limited in duration as the Trump administration does not want us petrol prices to break $4 a gallon. He expects Donald Trump to continue pressing Russia and Saudi Arabia to increase production in return for sanctions exemptions, military protection and access to artificial intelligence technology.
Does Gold still Poker Face?
As a traditional haven, gold has often soared on geopolitical tensions. But since the conflict, gold has fallen 2 per cent in a week and is hovering around $3,400.
“While the war between Israel and Iran always escalates, the conflict does not usually continue to push gold higher. Therefore, the trajectory of US budget negotiations will be critical, and if the deficit does not fall, the consequences, combined with market volatility, may eventually attract more buyers,” the Bank of America’s latest research notes.
For now, though, the market doesn’t seem overly dependent on gold. Bofa estimates that investors have only 3.5 per cent of their portfolios in gold.
And Deutsche Bank believes that the current rapid retreat of the geopolitical risk premium in gold may be a false signal, given the seriousness of the Israeli-iraqi conflict and the actual actions of the US military, it should be ready to rebuild its risk premium in the coming weeks.
According to Deutsche Bank, historical data show that event risk premiums for gold tend to peak in the 8th to 20th trading days after a crisis, averaging 5.5 per cent (spot prices) and 6.3 per cent (model residuals) .
Citigroup analyst Maximilian Layton’s team expects gold prices to peak at between $3,100 and $3,500 an ounce in the third quarter of this year and then gradually decline through the second half of the 2026, gold will fall back to a range of $2,500-$2,700 an ounce, down about 20-25 per cent from current forward prices, marking the end of this record rally.
There could be a sell-off in U. S. stocks
U. S. stocks, which have been relatively subdued in the conflict, have not fluctuated much over the past week.
But many analysts have previously predicted that if the United States launched a military attack on Iran, financial markets may be a“Knee-jerk sell-off.”.
Chuck Carlson, chief executive of Horizon Investment Services, a US Investment manager, has previously said us stocks could suffer a “Knee-jerk sell-off” in the early stages if Donald Trump ordered more US military involvement in the Israel-iraq conflict, but a faster escalation could also bring the situation to a quicker end.
US equity funds recorded their biggest weekly outflow in three months in the week ending June 18, data showed. Investors pulled $18.43 bn from US equity funds for the week, the largest weekly net outflow since March 19, according to LSEG Lipper.
Rising tensions between Israel and Iran, combined with persistent concerns about the economic impact of high US tariffs, have prompted investors to reduce their exposure.
Analysts remain wary of the biggest risk, the Strait of Hormuz. Mark Malek, chief investment officer at Siebert Financial in New York, stressed that if Iran had the ability to close the crucial strait, “It would definitely change everything”.
Art Hogan, chief market strategist at B Riley Wealth, said if an attack led to a disruption in Iranian oil supplies, “Then the market would really sit up and pay attention”.
“Geopolitical tensions are largely ignored by the stock market, but they are being incorporated into oil pricing,” Citigroup analysts said. “The key for us in the stock market will come from energy commodity pricing.”