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Financial markets are under pressure as oil and gold prices could rise amid rising tensions between Israel and Iran

As the new week approaches, financial markets are bracing for increased uncertainty, particularly in light of Iran's recent unprecedented attack on Israel.

This development has heightened concerns about potential retaliation and added further complexity for investors already grappling with the challenges of persistent inflation and expectations of persistently high interest rates.


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Bloomberg reported that the escalation of the Middle East crisis is expected to lead to additional volatility in the trading landscape.

Amid the uncertainty, gold has risen to record highs while the U.S. dollar has strengthened, reflecting the shift toward more stable assets amid geopolitical turmoil.

When Hamas launched attacks on Israel in October last year, the underlying concern among market participants was possible Iranian involvement.

As the conflict widens, predictions are circulating that oil prices could break $100, while safe havens such as treasuries, gold and the dollar could see increased demand amid further declines in the stock market.

Despite the potential for heightened market anxiety, Iran's assertion that it considers the incident closed is coupled with reports from the president Joe Biden Discouraging an Israeli retaliation could soften the reaction. Accordingly Patrick ArmstrongChief Investment Officer of Plurimi Wealth LLP, the market's focus could shift to safer assets, with the outcome heavily influenced by Israel's next move.

“The natural reaction of investors is to look for safe havens in moments like this,” Armstrong told the medium. “Reactions will depend to some extent on Israel’s response. If Israel does not escalate from here, this could provide an opportunity to buy risky assets at lower prices.”

Also read: Iran's drone strike likely to push oil prices higher as market prepares for Israel's response

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The market's immediate reaction was visible in Bitcoin's performance, which saw a nearly 9% decline following the attack but recovered the next day, indicating mixed investor sentiment.

In addition, stock markets in the Middle East, including Israel, Saudi Arabia and Qatar, recorded slight declines following the attack.

Accordingly Emre Akcakmaka Dubai-based senior adviser at East Capital reported to Bloomberg that markets opened relatively calm and interpreted Iran's actions as measured retaliation.

Still, the broader impact of global inflation, driven by potentially rising oil and energy prices, remains a concern for investors worldwide.

As tensions rise, the potential for a continued cycle of strikes and counterstrikes could make investors nervous as many look to the oil market for guidance.

With Brent crude already posting significant gains this year, any further conflict that threatens oil supplies could have far-reaching impacts across the Middle East and globally.

Global markets are already feeling the impact of these developments, with the S&P 500 seeing its biggest weekly decline since October, driven by inflation concerns and weak bank profits.

The coming week will be crucial as investors assess the situation and its potential impact on energy costs, inflation and interest rates.

Now Read: Crypto Markets Plunge After Iranian Drone Attack on Israel, Investor Warns of Continued Selloff

This content was created in part using AI tools, and was reviewed and published by Benzinga editors.

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