Breaking: Markets Steady Amid Rising Israel-Iran Tensions and Global Economic Crosswinds

Despite a dramatic escalation in the Israel-Iran conflict over the weekend, global markets opened the week on a surprisingly calm note. Iranian missiles struck Tel Aviv and Haifa early Monday, killing at least eight people and causing significant destruction. Israel responded with force after targeting Iran’s top military command and nuclear facilities in a surprise attack on Friday. The conflict marks a dangerous escalation, yet oil prices dipped slightly after spiking to a four-month high, and global stock markets rallied.

The diplomatic front remains bleak, as Iran reportedly told Qatar and Oman it would not entertain ceasefire talks while under Israeli assault. Meanwhile, both countries continue their military offensives. Concerns about a wider regional war have grown, but so far, oil infrastructure remains largely unaffected. Investors are closely watching the Strait of Hormuz, through which nearly 20% of global oil flows—any disruption there could severely impact global energy prices.

In financial markets, U.S. crude oil pulled back to $72.40 per barrel after nearing $78 last week. Gold retreated after failing to reach April’s record highs. U.S. Treasury yields held steady, and Wall Street futures edged higher. While energy markets brace for the worst, oil prices remain historically subdued, still down 8% year-on-year. Analysts caution that unless key infrastructure is hit, a major price shock is not yet imminent.

The geopolitical volatility comes at a critical time, with several major central bank meetings scheduled this week. The U.S. Federal Reserve, Bank of Japan, Bank of England, and Swiss National Bank are all meeting. While the Fed is not expected to cut rates until September, the SNB may move rates back to zero or even into negative territory amid strengthening of the Swiss franc and domestic deflation concerns.

Beyond the Middle East and monetary policy, China’s housing market continues to struggle, with new home prices falling again in May. This adds another layer of uncertainty to the global economic outlook. Meanwhile, G7 leaders gather in Canada, with the war in the Middle East and oil price caps on Russia topping their agenda. Notably, U.S. President Trump vetoed an Israeli proposal to target Iran’s Supreme Leader, underscoring the high stakes of this unfolding conflict.

Source: Reuters