Markets Weigh Up Risk of Retaliation-Cycle After Iran Hits Israel
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Financial markets are concerned about the risk of a retaliation-cycle after Iran's attack on Israel. The escalation of the Middle East crisis is expected to inject fresh volatility into the markets. Investors fear that oil prices could surpass $100 a barrel and expect a flight to safe-haven assets such as Treasuries, gold, and the dollar. The conflict in the Middle East has not yet impacted oil production, but attacks by Iran-backed Houthis in the Red Sea have disrupted shipping. Traders are also concerned about the potential disruption of tanker shipments from the Persian Gulf through the Strait of Hormuz. The S&P 500 is coming off its biggest weekly decline since October due to higher-than-expected inflation and disappointing bank earnings. Investors will be watching oil prices as a guide for how to respond. Gold has gained 13% this year and the US dollar has strengthened. The reaction of Israel and the US to the attack will be crucial in determining market sentiment and potential further escalation.
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