Gold and oil prices have been recording strong gains since the start of trading on Friday, while global stocks declined following the Israeli attack on Iran and rising market fears of an escalation in the Middle East conflict. This has led to a decline in risk appetite in markets and a rise in demand for safe-haven assets and currencies, in addition to strong increases in crude prices.
Israel launched an airstrike on Iran in the early hours of Friday morning. Explosions were heard in Tehran and Natanz, one of Iran’s main nuclear sites, as well as in several other Iranian cities. The deaths of the commander of the Revolutionary Guard, the chief of staff, the presidential advisor, and several nuclear scientists were announced. Israeli Prime Minister Netanyahu announced that Israel had struck the heart of Iran’s nuclear enrichment program.
This attack on nuclear facilities in Iran and the escalation of geopolitical tensions in the Middle East have heightened market concerns. The VIX fear index, which measures volatility, rose 22% this morning, while US index futures markets declined following declines in Asian and European markets and a decline in US Treasury yields.
In contrast, safe-haven assets rose following this blow, led by the yellow metal, which rose 1.19% in mid-European trading, trading at $3,423 per ounce, after testing $3,444 at the beginning of the Asian session, the highest level for gold since the end of April. Oil, in turn, was among the most affected by this strike, initially rising by more than 12%. Nymex crude tested $77 a barrel before recording some corrections and is currently trading at $74.17 a barrel, up 9%. Brent crude is up 8.72% and is trading at $75.41 a barrel. The direct impact on oil comes from rising fears of an expanding war in the Middle East, the world’s largest source of crude oil, as well as the impact of the Strait of Hormuz, a strategic oil transit point. It transports more than 30% of the world’s total oil consumptionTehran has threatened to close the strait in response to the pressure exerted on it, thus directly impacting crude prices due to supply shortages and the continued rise in crude oil prices.