The market ramifications of these recent surprise military moves by Israel against Iran are just now rattling global markets. In the U.S., the S&P 500 gained heat up by 0.38%. It closed Friday at 6,045.26, just shy of its all-time high set in February, and less than 2% from that record. The index, which includes all classes of stock for companies listed on the Nasdaq, gained 0.24% to close at 19,662.48. At the same time, the Dow Jones Industrial Average soared 101.85 points, 0.24% higher, to finish at 42,967.62.
Israel’s Defense Minister, Israel Katz, confirmed that the country launched a ‘preemptive strike’ against Iran, which he described as a necessary measure for national security. After the surprise assault, Katz declared a ‘special situation,’ raising the level of vigilance and alertness to the highest tier within Israel’s massive military apparatus.
In one of the biggest escalations yet, the Israeli military began launching airstrikes on specific Iranian targets. That escalation has raised fears of imminent Iranian retaliation. Katz has repeatedly sounded the alarm that a large scale missile and drone attack on Israel’s civilian population is imminent.
“Following the State of Israel’s preemptive strike against Iran, a missile and drone attack against the State of Israel and its civilian population is expected in the immediate future.” – Israel Katz
The implications of the conflict went far beyond military issues to include dramatic impacts on oil prices. The market was quick to respond. NEW YORK, June 26 – Oil prices spiked more than 7% on Tuesday after news of explosions in the northeastern suburbs of Tehran. U.S. West Texas Intermediate rose higher by $5.22, or 7.67%, settling at $73.26 a barrel. At the same time, the international benchmark Brent crude rose by $5.01, or 7.02%, to settle at $74.23 per barrel.
As a result, these developments have underscored the market’s sensitivity to geopolitical risks that it has mostly brushed off over the last year. Even Saul Kavonic, a pipeline opponent and veteran sector analyst, had a different tone on this sudden change of heart.
“The market has largely been shrugging off geopolitical risk for the last year, and these developments have been a wakeup call that these risks are more tangible and imminent than many expect.” – Saul Kavonic
To Kavonic’s point, these military actions would strategically align to pressure U.S.-Iran negotiations. Even if the surprise factor played a part, he suggested at least some room for de-escalation in the aftermath.
“It is possible these attacks could be calibrated to add pressure on U.S.-Iran negotiations and the situation subsequently de-escalate.” – Saul Kavonic
Geopolitical developments, including the ongoing war in Ukraine, are compounded. At the same time, U.S. producer prices rose only slightly by 0.1% month-to-month in May, a sign of calm amid escalating conflict fortunes.