Mideast fears
Fears of a wider war in the Middle East have swelled even more after Iran launched its biggest missile attack on Israel. The latest attack pushed crude oil higher and prompted a stock selloff in the U.S. on Tuesday as investors rushed to safe-haven assets.
What happened: Iran fired close to 200 ballistic missiles at Israeli military facilities on Tuesday, and the Pentagon said Israel intercepted most of the missiles with U.S. support. Damage on the ground was minimal. Tehran has since said its attack is over, unless Israel responds. Benjamin Netanyahu vowed that Iran will pay for its “big mistake.” Iran said any retaliation would invite a “crushing response,” and canceled commercial flights across the country until mid-morning Wednesday.
Market reaction: Crude oil edged higher on Tuesday after Iran’s attack, and continued to gain more than 2% overnight. Spot gold closed at its second-highest settlement ever, but has since pared gains. The greenback strengthened, with the U.S. Dollar Index (DXY) rising to as high as $101.3. U.S. stocks ended lower on Tuesday, and stock futures pointed to a lower open on Wednesday.
Expert takes: For the most part, the market fallout has been relatively muted. “Despite minimal threats to oil supplies, markets have already shown some risk-off moves,” said Charu Chanana, head of FX strategy, Saxo. “The main concern is if Israel targets Iran’s oil assets, as that could send shockwaves through global markets.” Separately, S&P Global downgraded its long-term credit ratings on Israel, given the risks of the escalating regional conflict that could persist into 2025.
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