Israel Strike on Iran Sparks Risk Off Sentiment; Iran Retaliates

Geopolitical Impact on Markets - Israel launched a targeted military operation against Iran, escalating tensions in the Middle East [1][5] - Iran retaliated with drones, leading to fears of a wider regional conflict [1][6] - The U S stated it was not involved in the strikes, while Iran holds Washington responsible [2][51] - Global leaders are urging de-escalation and diplomatic solutions [49] Oil Market Fluctuations - Oil prices surged, with Brent crude spiking 13% initially and settling at approximately 7% higher [3][51][66] - The Strait of Hormuz, a critical chokepoint for nearly 1/5 of seaborne crude, faces potential disruption risks [24] - Iran's oil exports, around 17 million barrels per day, are now in question [22] - The market has not priced in the risk of disruption in the Strait of Hormuz, and an attack on a single oil tanker could drastically change industry flows [25] Financial Market Reactions - NASDAQ was down 15% [3] - 10-year Treasury yields decreased by one basis point [4] - Gold rose by 11% as investors sought safe-haven assets [4] - The Euro weakened by 05% compared to the dollar [4] Potential Trade Implications - A wider conflict could strain the global trading system, affecting shipping lanes through the Persian Gulf, Red Sea, and Suez Canal [45] - Increased bottlenecks in the shipping system could lead to higher costs and inflation [46] - The conflict could impact negotiations between the U S and China, particularly regarding energy exports like LNG and LPG [32][33] Airline and Defense Industry Impact - Airlines are expected to underperform due to higher oil prices and potential airspace closures in the Middle East [38][107] - Defense stocks, such as RTX and Lockheed, are gaining due to increased geopolitical tensions [39][108]