How US-Iran tensions could shape world markets

Group 1: Conflict Overview - The United States and Israel launched strikes on Iran, targeting its leadership, which has escalated tensions in the Middle East [1] - Iran responded by launching missiles towards Israel, indicating a potential for further conflict [1] Group 2: Oil Market Impact - Oil is a key indicator of Middle East tensions, with Iran being a major producer located near the Strait of Hormuz, through which approximately 20% of global oil supply passes [2] - Following the attacks, some oil majors and trading houses suspended crude oil and fuel shipments via the Strait of Hormuz [3] - Brent crude oil prices were around $73 a barrel prior to the conflict, already reflecting a 20% increase this year, with projections suggesting prices could rise to about $80 or even $100 if the conflict disrupts supply [2][3][4] Group 3: Market Volatility - The conflict is expected to increase volatility across global markets, which have already experienced significant fluctuations this year due to various factors [5] - The VIX volatility index has risen by one-third this year, and implied U.S. bond volatility has increased by 15% [5] - Currency markets are also likely to be affected, with the dollar index falling by around 1% during previous conflicts, although such declines have been short-lived [5][6] Group 4: Currency Movements - The extent of currency fluctuations will depend on the duration and severity of the conflict, with expectations that the U.S. dollar may strengthen against most currencies if oil supplies are disrupted [6] - The Israeli shekel is anticipated to be particularly volatile, reacting to Iran's retaliatory actions [6][7]