Investors brace for oil price spike after Iran attack

The US attack on Iranian nuclear sites could lead to a knee-jerk reaction in global markets when they reopen, sending oil prices higher and triggering a rush to safety, investors say as they assess how the latest escalation of tensions will ripple through the global economy.
The attack, announced by President Donald Trump on social media site Truth Social, deepens US involvement in the Middle East conflict.
That was the question going into the weekend, when investors were mulling a host of different market scenarios.
In the immediate aftermath of the announcement, they expected the US involvement was likely to cause a sell-off in equities and a possible bid for the dollar and other safe-haven assets when trading began, but also said much uncertainty about the course of the conflict remained.
"I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital.
"We don't have any damage assessment and that will take some time.
"Even though he has described this as 'done', we're engaged. What comes next?" Spindel said.
"I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil."
Spindel, however, said there was time to digest the news before markets opened.
A key concern for markets would centre around the potential impact of the developments in the Middle East on oil prices and thus on inflation.
A rise in inflation could dampen consumer confidence and lessen the chance of near-term US interest rate cuts.
"This adds a complicated new layer of risk that we'll have to consider and pay attention to," said Jack Ablin, chief investment officer of Cresset Capital.
"This is definitely going to have an impact on energy prices and potentially on inflation as well."
While global benchmark Brent crude futures have risen as much as 18 per cent since June 10, hitting an almost five-month high of $US79.04 ($A121.82) on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13.
Before the US attack on Saturday, analysts at Oxford Economics modelled three scenarios, including a de-escalation of the conflict, a complete shutdown in Iranian oil production and a closure of the Strait of Hormuz, "each with increasingly large impacts on global oil prices".
In the most severe case, global oil prices jump to about $US130 ($A200) per barrel, driving US inflation close to six per cent by the end of 2025, Oxford said in the note.
"Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year," Oxford said in the note, published before the US strikes.
Economists warn a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs.
An escalation in the conflict could have mixed implications for the US dollar, which has tumbled amid worries over diminished US exceptionalism.
In the event of US direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said.
"Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger," said Steve Sosnick, chief market strategist at IBKR in Greenwich, Connecticut.
"It's hard to imagine stocks not reacting negatively and the question is how much. It will depend on Iranian reaction and whether oil prices spike."
The US attack on Iranian nuclear sites could lead to a knee-jerk reaction in global markets when they reopen, sending oil prices higher and triggering a rush to safety, investors say as they assess how the latest escalation of tensions will ripple through the global economy.
The attack, announced by President Donald Trump on social media site Truth Social, deepens US involvement in the Middle East conflict.
That was the question going into the weekend, when investors were mulling a host of different market scenarios.
In the immediate aftermath of the announcement, they expected the US involvement was likely to cause a sell-off in equities and a possible bid for the dollar and other safe-haven assets when trading began, but also said much uncertainty about the course of the conflict remained.
"I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital.
"We don't have any damage assessment and that will take some time.
"Even though he has described this as 'done', we're engaged. What comes next?" Spindel said.
"I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil."
Spindel, however, said there was time to digest the news before markets opened.
A key concern for markets would centre around the potential impact of the developments in the Middle East on oil prices and thus on inflation.
A rise in inflation could dampen consumer confidence and lessen the chance of near-term US interest rate cuts.
"This adds a complicated new layer of risk that we'll have to consider and pay attention to," said Jack Ablin, chief investment officer of Cresset Capital.
"This is definitely going to have an impact on energy prices and potentially on inflation as well."
While global benchmark Brent crude futures have risen as much as 18 per cent since June 10, hitting an almost five-month high of $US79.04 ($A121.82) on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13.
Before the US attack on Saturday, analysts at Oxford Economics modelled three scenarios, including a de-escalation of the conflict, a complete shutdown in Iranian oil production and a closure of the Strait of Hormuz, "each with increasingly large impacts on global oil prices".
In the most severe case, global oil prices jump to about $US130 ($A200) per barrel, driving US inflation close to six per cent by the end of 2025, Oxford said in the note.
"Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year," Oxford said in the note, published before the US strikes.
Economists warn a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs.
An escalation in the conflict could have mixed implications for the US dollar, which has tumbled amid worries over diminished US exceptionalism.
In the event of US direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said.
"Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger," said Steve Sosnick, chief market strategist at IBKR in Greenwich, Connecticut.
"It's hard to imagine stocks not reacting negatively and the question is how much. It will depend on Iranian reaction and whether oil prices spike."
The US attack on Iranian nuclear sites could lead to a knee-jerk reaction in global markets when they reopen, sending oil prices higher and triggering a rush to safety, investors say as they assess how the latest escalation of tensions will ripple through the global economy.
The attack, announced by President Donald Trump on social media site Truth Social, deepens US involvement in the Middle East conflict.
That was the question going into the weekend, when investors were mulling a host of different market scenarios.
In the immediate aftermath of the announcement, they expected the US involvement was likely to cause a sell-off in equities and a possible bid for the dollar and other safe-haven assets when trading began, but also said much uncertainty about the course of the conflict remained.
"I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital.
"We don't have any damage assessment and that will take some time.
"Even though he has described this as 'done', we're engaged. What comes next?" Spindel said.
"I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil."
Spindel, however, said there was time to digest the news before markets opened.
A key concern for markets would centre around the potential impact of the developments in the Middle East on oil prices and thus on inflation.
A rise in inflation could dampen consumer confidence and lessen the chance of near-term US interest rate cuts.
"This adds a complicated new layer of risk that we'll have to consider and pay attention to," said Jack Ablin, chief investment officer of Cresset Capital.
"This is definitely going to have an impact on energy prices and potentially on inflation as well."
While global benchmark Brent crude futures have risen as much as 18 per cent since June 10, hitting an almost five-month high of $US79.04 ($A121.82) on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13.
Before the US attack on Saturday, analysts at Oxford Economics modelled three scenarios, including a de-escalation of the conflict, a complete shutdown in Iranian oil production and a closure of the Strait of Hormuz, "each with increasingly large impacts on global oil prices".
In the most severe case, global oil prices jump to about $US130 ($A200) per barrel, driving US inflation close to six per cent by the end of 2025, Oxford said in the note.
"Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year," Oxford said in the note, published before the US strikes.
Economists warn a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs.
An escalation in the conflict could have mixed implications for the US dollar, which has tumbled amid worries over diminished US exceptionalism.
In the event of US direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said.
"Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger," said Steve Sosnick, chief market strategist at IBKR in Greenwich, Connecticut.
"It's hard to imagine stocks not reacting negatively and the question is how much. It will depend on Iranian reaction and whether oil prices spike."
The US attack on Iranian nuclear sites could lead to a knee-jerk reaction in global markets when they reopen, sending oil prices higher and triggering a rush to safety, investors say as they assess how the latest escalation of tensions will ripple through the global economy.
The attack, announced by President Donald Trump on social media site Truth Social, deepens US involvement in the Middle East conflict.
That was the question going into the weekend, when investors were mulling a host of different market scenarios.
In the immediate aftermath of the announcement, they expected the US involvement was likely to cause a sell-off in equities and a possible bid for the dollar and other safe-haven assets when trading began, but also said much uncertainty about the course of the conflict remained.
"I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital.
"We don't have any damage assessment and that will take some time.
"Even though he has described this as 'done', we're engaged. What comes next?" Spindel said.
"I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil."
Spindel, however, said there was time to digest the news before markets opened.
A key concern for markets would centre around the potential impact of the developments in the Middle East on oil prices and thus on inflation.
A rise in inflation could dampen consumer confidence and lessen the chance of near-term US interest rate cuts.
"This adds a complicated new layer of risk that we'll have to consider and pay attention to," said Jack Ablin, chief investment officer of Cresset Capital.
"This is definitely going to have an impact on energy prices and potentially on inflation as well."
While global benchmark Brent crude futures have risen as much as 18 per cent since June 10, hitting an almost five-month high of $US79.04 ($A121.82) on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13.
Before the US attack on Saturday, analysts at Oxford Economics modelled three scenarios, including a de-escalation of the conflict, a complete shutdown in Iranian oil production and a closure of the Strait of Hormuz, "each with increasingly large impacts on global oil prices".
In the most severe case, global oil prices jump to about $US130 ($A200) per barrel, driving US inflation close to six per cent by the end of 2025, Oxford said in the note.
"Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year," Oxford said in the note, published before the US strikes.
Economists warn a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs.
An escalation in the conflict could have mixed implications for the US dollar, which has tumbled amid worries over diminished US exceptionalism.
In the event of US direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said.
"Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger," said Steve Sosnick, chief market strategist at IBKR in Greenwich, Connecticut.
"It's hard to imagine stocks not reacting negatively and the question is how much. It will depend on Iranian reaction and whether oil prices spike."

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Perth Now

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US bombing of Iran started with a fake-out

As Operation "Midnight Hammer" got underway on Saturday, a group of B-2 bombers took off from their base in Missouri and were noticed heading out toward the Pacific island of Guam, in what experts saw as possible pre-positioning for any US decision to strike Iran. But they were a decoy. The real group of seven bat-winged, B-2 stealth bombers flew east undetected for 18 hours, keeping communications to a minimum, refueling in mid-air, the US military revealed on Sunday. As the bombers neared Iranian airspace, a US submarine launched more than two dozen Tomahawk land attack cruise missiles. US fighter jets flew as decoys in front of the bombers to sweep for any Iranian fighter jets and missiles. The attack on Iran's three main nuclear sites was the largest operational strike ever by B-2 stealth bombers, and the second-longest B-2 operation ever flown, surpassed only by those following the September 11, 2001, attacks on the United States by al Qaeda. The B-2 bombers dropped 14 bunker-busting GBU-57 Massive Ordnance Penetrators, each weighing 13,600 kg. The operation involved over 125 US military aircraft, according to the Pentagon. From the US military's perspective, the operation was a resounding tactical success. The Iranians were unable to get off a single round at the American aircraft and were caught completely flat-footed, General Dan Caine, the chairman of the Joint Chiefs of Staff, told reporters at the Pentagon on Sunday. "Iran's fighters did not fly, and it appears that Iran's surface to air missile systems did not see us throughout the mission," Caine said. "We retained the element of surprise." Caine said initial battle damage assessments indicated that all three sites targeted sustained extremely severe damage and destruction, but he declined to speculate whether any Iranian nuclear capabilities might still be intact. US Defense Secretary Pete Hegseth was more confident. "It was clear we devastated the Iranian nuclear program," he said, standing alongside Caine in the Pentagon briefing room. Midnight Hammer was highly classified, Caine said, "with very few people in Washington knowing the timing or nature of the plan." Many senior officials in the United States only learned of it on Saturday night from President Donald Trump's first post on social media. Hegseth said it took months of preparations to ensure the US military would be ready if Trump ordered the strikes. Caine said the mission itself, however, came together in just a matter of weeks.

West Australian

41 minutes ago

• West Australian

US bombing of Iran started with a fake-out

As Operation "Midnight Hammer" got underway on Saturday, a group of B-2 bombers took off from their base in Missouri and were noticed heading out toward the Pacific island of Guam, in what experts saw as possible pre-positioning for any US decision to strike Iran. But they were a decoy. The real group of seven bat-winged, B-2 stealth bombers flew east undetected for 18 hours, keeping communications to a minimum, refueling in mid-air, the US military revealed on Sunday. As the bombers neared Iranian airspace, a US submarine launched more than two dozen Tomahawk land attack cruise missiles. US fighter jets flew as decoys in front of the bombers to sweep for any Iranian fighter jets and missiles. The attack on Iran's three main nuclear sites was the largest operational strike ever by B-2 stealth bombers, and the second-longest B-2 operation ever flown, surpassed only by those following the September 11, 2001, attacks on the United States by al Qaeda. The B-2 bombers dropped 14 bunker-busting GBU-57 Massive Ordnance Penetrators, each weighing 13,600 kg. The operation involved over 125 US military aircraft, according to the Pentagon. From the US military's perspective, the operation was a resounding tactical success. The Iranians were unable to get off a single round at the American aircraft and were caught completely flat-footed, General Dan Caine, the chairman of the Joint Chiefs of Staff, told reporters at the Pentagon on Sunday. "Iran's fighters did not fly, and it appears that Iran's surface to air missile systems did not see us throughout the mission," Caine said. "We retained the element of surprise." Caine said initial battle damage assessments indicated that all three sites targeted sustained extremely severe damage and destruction, but he declined to speculate whether any Iranian nuclear capabilities might still be intact. US Defense Secretary Pete Hegseth was more confident. "It was clear we devastated the Iranian nuclear program," he said, standing alongside Caine in the Pentagon briefing room. Midnight Hammer was highly classified, Caine said, "with very few people in Washington knowing the timing or nature of the plan." Many senior officials in the United States only learned of it on Saturday night from President Donald Trump's first post on social media. Hegseth said it took months of preparations to ensure the US military would be ready if Trump ordered the strikes. Caine said the mission itself, however, came together in just a matter of weeks.

News.com.au

an hour ago

• News.com.au

US strikes on Iran: what we know

The United States has carried out strikes that caused "extremely severe damage" to three of Iran's nuclear facilities, the top US military officer, General Dan Caine, said on Sunday. President Donald Trump had spent weeks pursuing a diplomatic path to replace the nuclear deal with Tehran that he tore up during his first term in 2018. But he ultimately decided to take military action against Iran's nuclear program, which had already been bombarded in a more than week-long Israeli campaign that has also targeted Tehran's top military brass. Below, AFP examines what we know about the US strikes on Iran -- an operation dubbed "Midnight Hammer." - Major operation - Caine told journalists the strikes involved more than 125 US aircraft including B-2 Spirit stealth bombers, fighters, aerial refueling tankers, a guided missile submarine and intelligence, surveillance and reconnaissance aircraft. "This mission demonstrates the unmatched reach, coordination and capability of the United States military," the general said. "No other military in the world could have done this." Caine said it was "too early" to comment on what remains of Iran's nuclear program, but that "initial battle damage assessments indicate that all three sites sustained extremely severe damage and destruction." - B-2 bombers - The US employed seven B-2s in the strikes -- aircraft that can fly 6,000 nautical miles (9,600 kilometers) without refueling and which are designed to "penetrate an enemy's most sophisticated defenses and threaten its most valued, and heavily defended, targets," according to the US military. "This was the largest B-2 operational strike in US history and the second-longest B-2 mission ever flown," according to Caine. Several B-2s proceeded west over the Pacific as a decoy while the bombers that would take part in the strikes headed east -- a "deception effort known only to an extremely small number of planners and key leaders," the general said. "Iran's fighters did not fly, and it appears that Iran's surface-to-air missile systems did not see us. Throughout the mission, we retained the element of surprise," Caine said. The United States used the B-2 in operations against Serbian forces in the 1990s, flying non-stop from Missouri to Kosovo and back, and the bombers were subsequently employed in the Afghanistan and Iraq wars in the 2000s. - Massive Ordnance Penetrator - Caine said the B-2s dropped 14 bombs known as the GBU-57 or Massive Ordnance Penetrator -- a powerful 30,000-pound (13,600-kilogram) bunker-busting weapon that made its combat debut in the Iran operation. The bombs -- which are designed to penetrate up to 200 feet (60 meters) underground before exploding -- were needed to hit deeply buried Iranian nuclear facilities. Testing of the weapons began in 2004 and Boeing was in 2009 awarded a contract to complete the integration of GBU-57 with aircraft. - Tomahawk cruise missiles - In addition to the bombers, a US guided missile submarine in the Middle East launched more than two dozen missiles at unspecified "surface infrastructure targets" at Isfahan, one of three nuclear sites struck in the operation, Caine said. The missiles are "designed to fly at extremely low altitudes at high subsonic speeds, and are piloted over an evasive route by several mission tailored guidance systems" and were first used in 1991 against Iraqi forces during Operation Desert Storm, according to the US military. - Aim of the strikes - US Defense Secretary Pete Hegseth told journalists the strikes were launched to "neutralize the threats to our national interests posed by the Iranian nuclear program and the collective self-defense of our troops and our allies." "This mission was not, has not been, about regime change," Hegseth told journalists. A number of key figures in Trump's "Make America Great Again" movement have vocally opposed US strikes on Iran, and his promise to extract the United States from its "forever wars" in the Middle East played a role in his 2016 and 2024 election wins. - What comes next? - Trump has called on Iran to "agree to end this war," saying that "now is the time for peace." But it remains to be seen whether the strikes will push Tehran to deescalate the conflict, or to widen it further. If Iran chooses the latter option, it could do so by targeting American military personnel who are stationed around the Middle East, or seek to close the strategic Strait of Hormuz, which carries one-fifth of global oil output.