On tenterhooks
There was little market reaction today to Iran's weekend attack on Israel. That could change quickly if a counterattack escalates tensions further.
The relative global market calm in reaction to Iran’s barrage of more than 300 drones and missiles on Israel on Saturday belies a new strategic reality — that Tehran’s unprecedented direct military attacks represent just the type of regional escalation scenario that United States President Joe Biden has been desperate to avert.
Asian markets were slightly down on Monday, as was the ASX 200, though there were other factors — including stubborn US inflation — contributing to risk-off sentiment that has also seen both gold and the greenback extend their recent strength. Oil prices were more or less flat.
The calm, however, is predicated on a US-led diplomatic offensive successfully convincing a riled Benjamin Netanyahu to be measured in his response. It remains true that hostilities are closer than ever to spiralling into a broader regional war.
Iran has long engaged in a shadow war with Israel and is a longtime backer of Hamas, the group responsible for the 7 October terrorist attacks. Tehran said Saturday’s assault was carried out in retaliation against an alleged Israeli strike that killed seven army officers at its diplomatic mission in the Syrian capital of Damascus. It said the operation was a success and, having made its point, was now over.
