Oil rises and stocks slump after US strikes on Iran's nuclear sites
Investors reacted to US strikes on Iran over the weekend as Iran and Israel continued to trade missile fire on Monday morning.
The price of Brent crude oil rose around 1.53% to $78.19 a barrel as of around 7.15 CEST, while WTI rose 1.48% to $74.93 a barrel.
On Sunday, US forces attacked three Iranian nuclear and military sites, stating that Tehran must not be allowed to possess a nuclear weapon.
President of Iran Masoud Pezeshkian said that the country "will never surrender to bullying and oppression", while Iranian foreign minister Abbas Araghchi has arrived in Moscow for talks with Russian president Vladimir Putin.
Futures for the S&P 500 slipped 0.13% to 6,010.25 and Dow Jones Industrial Average futures dropped 0.2% to 42,431.00. Nasdaq futures fell 0.18% to 21,804.50 on Monday morning.
In Asian trading, Tokyo's Nikkei 225 index fell 0.19% to 38,331.12, the Kospi in Seoul dropped 0.3% to 3.012,88, and Australia's S&P/ASX 200 declined 0.37% to 8,474.40.
Hong Kong's Hang Seng and the Shanghai Composite Index were in positive territory, with respective gains of 0.35% to 23,611.68 and 0.13% to 3,364.29.
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Energy in Europe is also at stake as Israel-Iran conflict escalates
Israel-Iran conflict fuels best month for energy stocks since 2022
The conflict, which flared up after an Israeli attack against Iran on 13 June, has sent oil prices higher linked to Iran's status as a major oil producer.
The nation is also located on the narrow Strait of Hormuz, through which much of the world's crude oil passes.
Investors are concerned that Tehran might decide to bomb oil infrastructure in neighbouring countries or block tankers from travelling through the Strait of Hormuz.
Shipping company Maersk said on Sunday that it was continuing to operate through the strait, adding: "We will continuously monitor the security risk to our specific vessels in the region and are ready to take operational actions as needed."
According to vessel tracking data compiled by Bloomberg, two supertankers Coswisdom Lake and South Loyalty U-turned in the Strait of Hormuz on Sunday.
The situation now hinges on whether Tehran decides to opt for aggression or a more diplomatic response to US and Israeli strikes.
Iran could attempt to close the waterway by setting mines across the Strait or striking and seizing vessels. Even so, this would likely be met by a forceful response from the US navy, meaning the oil price spike may not be sustained.
Some analysts also think Iran is unlikely to close down the waterway because the country uses it to transport its own crude, mostly to China, and oil is a major revenue source for the regime.
If Tehran did successfully close the Strait, this would cause a wider price spike for transported goods and complicate the deflationary process in the US, potentially keeping interest rates higher for longer.
On Monday morning, Trump also floated the possibility of regime change in Iran.
"If the current Iranian regime is unable to make Iran great again, why wouldn't there be regime change?" said the US president on Truth Social.
Vice-president J.D. Vance had commented earlier that the administration did not seek regime change in Iran.
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