Global markets were already volatile due to resurgent inflationary fears and a hawkish Federal Reserve when Israel’s military struck Iran today. It sent traders scampering on a flight to safety amid fears the latest in a series of tit-for-tat retaliatory attacks could tip the Middle East into an irreconcilable escalatory spiral.
Benchmark Brent crude oil surged as much as 4% as news of the attack broke, topping USD90 a barrel, and gold pushed through $US2400/ounce to just shy of a fresh record high, before both partially retraced. A strong greenback saw the Australian dollar fall below $US0.64 — its lowest levels since November — while the ASX 200 extended its recent weak run, drifting near a three-month low.
“The lack of clarity about the latest explosion and what Iran might do next will keep investors nervous and markets volatile for now, at a time when investors are already faced with significant inflation and interest rate fears,” said Vasu Menon, an investment strategist at OCBC Bank.
While details remained hazy throughout the Australian trading session, markets appeared to take heart from a lack of reports of major damage, and initial dispatches from both western and Iranian news agencies indicating Tehran appeared to be downplaying the scale of the strikes.
