The global prices of oil may see a spike following US President Donald Trump’s decision to strike three nuclear facilities in Iran, directly entering the ongoing tensions between Iran and Israel.
Tribune Online reports that Trump, while addressing the nation from the White House, said the Fordow, Isfahan, and Natanz facilities were “completely and fully obliterated” in a military operation on Iran.
The U.S. added there are more targets left if the Iranian regime attempted to attack America or its interests.
Following the US attack on Iran, the market impact of President Donald Trump’s decision is already beginning to reshape investor expectations across asset classes, sectors and geographies.
As markets reopen, reports say investors are bracing for sharp volatility, with crude oil prices expected to surge and inflation forecasts now under intense scrutiny.
With the U.S. formal entry into the conflict that had remained largely contained within the Middle East, there’s a growing fear the action may trigger broad-based repricing across the global economy.
“The US strike on Iran’s nuclear sites is a market-defining moment,” says Nigel Green, CEO of financial advisory giant deVere Group. “It’s a direct hit to the assumptions that have been driving investor positioning: lower inflation, falling rates, and stable energy prices. This framework has just been broken.”
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Tribune Online gathered that Brent crude had already been climbing steadily in recent weeks, but the decision to target Iranian nuclear facilities has dramatically increased fears of retaliation and disruption.
Meanwhile, in a quick response to the U.S. attacks on its facilities, the Iranian regime, through its Foreign Minister Abbas Araghchi, has declared that the U.S. “will have everlasting consequences” to face after the airstrikes that mark a sharp escalation in the ongoing conflict between Israel and Iran.
Iran Oil and Market Fears
As the third-largest oil producer in the world, Iran accounts for over 24 percent of the oil in the Middle East and over 10 percent of the global oil.
As the threats of a possible escalation between Iran, Israel and the U.S., the global oil marketers fear that such may constitute threats to the Strait of Hormuz, through which nearly 20% of the world’s oil flows.
Should Middle East supplies be disrupted, the market believes this would send prices sharply higher.
According to JPMorgan, Brent Crude, already up 20% over the past month to $79.04, could climb toward $130 per barrel in a worst-case scenario, depending on Iran’s next move.
“Such a price shock would filter through to global inflation, which remains elevated and/or sticky in many regions. Market participants had been pricing in rate cuts from central banks including the Federal Reserve in the second half of the year. That is now in question,” the deVere CEO noted.
“A sustained surge in oil makes rate cuts very difficult to justify. If inflation spikes back up, monetary policymakers will be forced to hold, and possibly even reconsider the easing cycle altogether,” says Nigel Green.
“That fundamentally changes the landscape for equity sectors, currencies, and credit.”
He continued: “In equities, the most immediate reaction is likely to be a rotation out of rate-sensitive and consumer-driven sectors. Travel and tourism companies, which are highly vulnerable to energy costs and geopolitical disruptions, are expected to come under pressure. Tech stocks, particularly those trading on high multiples, may also see selling as the bond market rethinks the rate outlook.”
At the same time, there is likely to be “increased investor appetite for energy producers, commodity firms and companies tied to national defense. With military budgets already rising in several developed economies, firms linked to security, surveillance, aerospace and weapons manufacturing are well-positioned to benefit from a surge in demand.”
Another Energy expert and Chief Investment Officer (CIO) at Potomac River Capital predicted that “Oil will open higher,” noting uncertainty over Iran’s response and damage assessments.
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