Oil surge, market jitters expected after U.S. hits Iran facilities
Though Sunday saw a relatively muted response in Gulf equity markets, analysts and fund managers said the escalation marked a turning point, dragging the United States directly into the Israel-Iran conflict and raising the prospect of broader economic fallout.
In a national address, U.S. President Donald Trump declared the strike a "spectacular military success," saying Iran's key nuclear enrichment facilities had been "completely and totally obliterated." Trump warned of further military action unless Tehran agrees to a peace deal.
Iran responded sharply, vowing "everlasting consequences." Foreign Minister Abbas Araqchi said from Istanbul that Tehran would consider diplomacy only after retaliation.
The broader market reaction will hinge on Iran's next steps. "Much depends on how Iran responds in the coming hours and days," said Saul Kavonic, energy analyst at MST Marquee. He warned that Tehran could strike U.S. interests or disrupt oil flows through the Strait of Hormuz — a vital corridor for global energy trade. "This could set us on a path towards $100 oil," he added.
The Strait lies between Iran and Oman and is the main export route for Gulf oil producers like Saudi Arabia, Iraq, and Kuwait. A disruption there could have sweeping consequences for inflation and global supply chains.
Even before the U.S. attack, Brent crude had climbed 18 per cent since June 10, reaching $79.04 — a five-month high. A further surge could complicate central banks' efforts to tame inflation and delay expected interest rate cuts.
"I think oil will open higher," said Mark Spindel of Potomac River Capital, adding that the lack of a clear endgame would weigh on investor sentiment. "We're engaged. And uncertainty will blanket the markets."
Retail investor confidence may already be wobbling. Ether, the second-largest cryptocurrency, dropped 8.5 per cent on Sunday, down 13 per cent since Israel's initial strikes on Iran on June 13.
Despite the tensions, Gulf stock markets appeared largely unshaken. Benchmarks in Qatar, Saudi Arabia, and Kuwait were flat or slightly up. Israel's Tel Aviv 125 index touched a record high.
Still, some see a path to resolution. Jamie Cox of Harris Financial Group said the attack might force Iran into negotiations. "With this demonstration of force... they've lost all of their leverage," he said. "They'll likely hit the escape button to a peace deal."
History offers some reassurance: past Middle East flareups, like the 2003 Iraq war and the 2019 Saudi oil facility attack, triggered brief equity selloffs, but markets recovered within months.
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