In a June 21 address at the White House, President Donald Trump said the United States had struck Iran’s nuclear sites.
In the United States, the S&P 500 Index was trading at 5,976 on Monday as of 9:40 a.m. EDT, up 0.13 percent from Friday.
In Europe, the Stoxx 50 index was trading down by roughly 0.38 percent. The Israeli stock index TA 125 had surged during the Sunday trading session to hit a record high. However, the index fell by more than 1 percent in the Monday session.
In Asia, Japan’s Nikkei 225 index remained flat on Monday from Friday’s closing, China’s Shanghai Composite index gained 0.65 percent, while India’s Nifty 50 index fell by 0.56 percent.
Brent crude oil futures were down marginally by 0.27 percent. Among cryptocurrencies, bitcoin had declined on both Saturday and Sunday but was slightly up on Monday.
In a June 23 post, ING Bank said the most likely economic consequence of the U.S. strikes on Iran “will be on general uncertainty and on the price of oil.” The financial markets are “currently waiting for Iran’s response,” it said.
“Along with the threat stemming from higher oil prices, uncertainty at elevated levels is another dampening factor for economic activity in the U.S. and eurozone,” ING said.
“Regarding the U.S. and the Federal Reserve, inventory buffers may have allowed firms to put off decisions about raising prices, but that won’t be the case for much longer. We expect to see bigger spikes in the month-on-month inflation figures through the summer.”
Vasu Menon, managing director of investment strategy at OCBC Bank, Singapore, said that investors should prepare for “more volatility” in markets in the coming days and potentially weeks.
“Much depends on what Iran will do next, but the shock and awe of the US attack and the warning from Trump not to retaliate or suffer significant consequences, may prevent Iran’s leaders from responding aggressively,” he said.
“There is scope for safe havens like gold to continue rising as global uncertainties are likely to remain a fixture, and global central banks continue to diversify away from their U.S. dollar holdings towards gold. We see gold rising to US$3,900/ounce over a 12-month horizon.”
On Monday, spot gold was up by around 0.3 percent and was trading at roughly $3,378 per ounce.
Iran–US Tensions, Oil Supply Risk
The U.S. strikes against Iran had targeted three nuclear sites: Fordow, Natanz, and Isfahan facilities. Iran’s state-run IRNA news agency has confirmed that these facilities were hit.
Despite the attacks, the Atomic Energy Organization of Iran vowed to continue pursuing its agenda. It called the attacks a violation of international law, according to a statement shared by state-run PressTV.
In his June 21 White House address, Trump warned Iran against pursuing the conflict further.
“Iran, the bully of the Middle East, must now make peace. If they do not, future attacks will be far greater and a lot easier,” he said, adding that there are still many targets left in the Middle Eastern nation.
A key issue is whether Iran would opt to shut down the Strait of Hormuz as retaliation for the U.S. strikes. Iran’s Press TV reported on Sunday that the country’s Supreme National Security Council has yet to make a decision on the matter.
In a June 23 post, ING Bank said that disrupting shipping flows through the Strait of Hormuz is a “major risk for the oil market.”
“This is a crucial choke point for global oil and LNG flows, with a quarter of seaborne oil trade moving through the strait. Roughly 20 percent of global LNG trade also moves through the strait,” it said.
“An effective blocking of the Hormuz would lead to a dramatic shift in the outlook for oil, pushing the market into deep deficit. Spare OPEC production capacity wouldn’t help in this situation. The bulk of it sits in the Persian Gulf. So, these flows would also have to go through the Strait of Hormuz.”
On Sunday, Iranian Foreign Minister Abbas Araqchi said the country reserves “all options” to respond to the American strikes.
White House press secretary Karoline Leavitt said on Monday that the Trump administration was “actively and closely monitoring the situation in the Strait of Hormuz” and that the Iranian regime “would be foolish” to block the route.
Reuters contributed to the report.
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