Iranians celebrate after Iran launched drone attacks against Israel; in front of the British embassy in Tehran, Iran, Monday is expected to be a volatile day on global markets. Photograph: EPAin October, the biggest fear for many market participants was that Iran would ultimately be drawn into the fighting. Now as the conflict widens, many say oil could surpass $100 a barrel and expect a flight to Treasuries, gold and the dollar, along with further stock-market losses.
“Investors’ natural reaction is to look for safe-haven assets in moments like this,” said Patrick Armstrong, chief investment officer at Plurimi Wealth. “Reactions will be somewhat dependent on Israel’s response. If Israel does not escalate from here, it may provide an opportunity to buy risk assets at lower prices.”Bitcoin gave an early insight into market sentiment.
Although the conflict in the Middle East hasn’t yet had any impact on production, Red Sea attacks by Iran-backed Houthis in the Red Sea have disrupted shipping. Traders mostly fear a widening conflict could disrupt tanker shipments from the Persian Gulf through the Strait of Hormuz. In the bond market, traders will be weighing the risk that more expensive energy bills may add to swirling inflation fears.