The recent attack on Israel by Iran was not entirely unexpected, as the market had shown signs of anxiety on Friday. Hundreds of drones and missiles were involved in the attack, which took place during the night between Saturday and Sunday. While the direct economic damage appears to be relatively small, the effects on international trade and the economy, especially in the price of oil, are expected to be significant.
Israeli officials have confirmed that some damage was caused to the Israeli armed forces, with limited information on material and personal damage so far. The White House has announced that it assisted Israel in repelling most of the drones and missiles in the attack.
The rise in oil prices could impact various asset classes like gold and the dollar, which are considered safe havens during times of geopolitical instability. Experts like Lippo Suominen from S-bank believe that this may particularly affect industries like energy and defense.
The immediate reaction to the attack was seen in the stock market, with a decline in S&P500 index on Friday and a significant rise in Vix index, which measures market volatility. However, Suominen suggests that certain sectors may benefit from this rise in oil prices.
In addition to affecting traditional financial markets, Bitcoin also experienced price fluctuations following the attack. There are concerns about potential escalation of war with Iran threatening further military measures if Israel retaliates. However, some experts believe that investors were prepared for this eventuality and have already factored it into their portfolios.
The level of escalation and Israel’s response will play a crucial role in determining how markets will move forward. Avoiding further escalation could provide relief to markets while any significant military actions could lead to increased uncertainty and volatility.
