Iran’s attack involved more than 300 missiles and drones, and was the first on Israel from another country in more than three decades, raising concerns about a broader regional conflict affecting oil traffic through the Middle East.
But the attack, which Iran called retaliation for an airstrike on its Damascus consulate, caused only modest damage, with missiles shot down by Israel’s “Iron Dome” defense system. Israel, which is at war with Iran-backed Hamas militants in Gaza, has neither confirmed nor denied it struck the consulate.
While stock markets in Asia were mixed – as many caught up with Friday’s late sell-off on Wall Street – there was a clear bounceback in U.S. stock futures first thing on Monday and European stocks were higher too.
Hampered additionally by a dour take on JPMorgan’s otherwise forecast-beating first quarter results, the S&P500 recorded its worst day since January on Friday as the Middle East tension went up several notches.
The central fear is an escalating regional conflict could seed another energy shock and further roil U.S. markets already on edge about stubborn inflation readings and possible Federal Reserve hesitation in cutting interest rates over the remainder of the year.
But Friday’s broader market moves appeared more like classic uncertainty trades – amid fears of dislocated prices as events took place while markets were shut over the weekend.
And while there were some hopes the standoff between Israel and Iran may stop short of a direct conflict between the two regional military powers, the uncertainty could persist for several weeks or more.
Gold prices, which have been rising sharply to record highs over the past six weeks, spiked more than 2% on Friday, but have largely unwound that latest move since.
Even U.S. Treasuries – often one of the key liquid havens sought in such a crisis – received a safety bid on Friday despite a turbulent week of inflation concerns and despite the jump in oil prices.
