Stocks tumble, oil soars as Israel’s strike on Iran roils investors

TOKYO: Stocks dived in Asian trade on Friday, led by a selloff in Wall Street futures, while oil prices surged after Israel conducted a military strike on Iran, sending investors scurrying to safe havens such as gold and the Swiss franc.

The escalation in hostilities in the Middle East – a major oil producing region – adds a fresh layer of uncertainty for financial markets at a time of heightened pressure on the global economy from U.S. President Donald Trump’s aggressive and erratic trade policies.

Read more: Israel claims Iran was reaching “the point of no return” regarding nuclear enrichment

Market reaction was swift. Crude oil jumped about 9%, with Brent futures LCOc1 rallying $6 to $75.36 per barrel and WTI futures CLc1 $6.16 higher at $74.20 per barrel by 0228 GMT. Gold XAU= climbed 1.5% to about $3,434 per ounce, taking it closer to the record high of $3,500.05 from April.

U.S. S&P E-mini futures EScv1 slumped 1.7% and Nasdaq futures NQc1 skidded 1.8%. Pan-European STOXX 50 futures STXEc1 tumbled 1.6%.

Japan’s Nikkei .N225 lost 1.3%, South Korea’s KOSPI .KS11 dropped 1.1% and Hong Kong’s Hang Seng .HSI declined 0.8%.

“The geopolitical escalation adds another layer of uncertainty to already fragile sentiment,” said Charu Chanana, chief investment strategist at Saxo, adding that crude oil and safe-haven assets will remain on an upward trajectory if tensions continue to intensify.

Global stocks markets had been poised for a fall following an almost unbroken rally since early April that took the MSCI All-Country World index .MIWD00000PUS to an all-time high this week, according to Jessica Amir, a strategist at MooMoo.

“There’s room for fat to be taken off the table,” she said.

“It just appears that this is the catalyst that will probably send equities down lower.”

Israel said it was declaring a state of emergency in anticipation of a missile and drone strike by Tehran, after what it called a “preemptive strike” over Iran’s nuclear programme.

Iranian state media confirmed on Friday the killing of Iran’s Revolutionary Guards Commander Hossein Salami in the Israeli strike.

An Israeli defence official had earlier said members of Iran’s general staff, including the chief of staff and several senior nuclear scientists were likely killed.

U.S. Secretary of State Marco Rubio called Israel’s strikes against Iran a “unilateral action” and said Washington was not involved.

Tensions had been building as Trump’s efforts to reach a nuclear deal with Iran appear to be deadlocked. U.S. and Iranian officials were scheduled to hold a sixth round of talks on Tehran’s escalating uranium enrichment programme in Oman on Sunday, according to officials from both countries and their Omani mediators.

U.S. Treasuries were bought in the rush for safer assets, sending the yield on 10-year notes US10YT=RR to a one-month low of 4.31%.

The Swiss franc CHF=EBS gained about 0.4% to 0.8072 per U.S. dollar, and fellow safe haven the yen JPY=EBS appreciated 0.3% to 143.12 per dollar.

Some traders were also attracted to the dollar as a haven, with the dollar index =USD up 0.5% to 98.131.

The euro EUR=EBS eased 0.4% to $1.1538, giving back a little of its 0.9% overnight jump to the highest since October 2021.

Sterling GBP=D3 slipped 0.5% to $1.3554, after marking a fresh high since February 2022 at $1.3613 early in the day.

Read more: Israel strikes Iran nuclear facilities, missile factories

“While we await further news and a potential response from Iran, we are likely to see a further deterioration in risk sentiment as traders cut risk seeking positions ahead of the weekend,” said Tony Sycamore, an analyst at IG.