Oil prices surged, and gold hovered near record highs on Tuesday as escalating geopolitical tensions in the Middle East fueled a broad risk-off sentiment across global markets. Iran’s barrage of missile attacks on Israel heightened fears of a larger regional conflict, driving a flight to safety that lifted both crude and haven assets while putting pressure on U.S. equities.
As markets braced for potential retaliatory measures from Israel, investor sentiment turned cautious, with traders piling into safe-haven investments. Brent crude and West Texas Intermediate (WTI) posted solid gains, while gold—traditionally seen as a hedge against geopolitical risks—remained close to record levels, reflecting heightened uncertainty.
U.S. stocks, on the other hand, were under pressure as investors weighed the broader implications of rising geopolitical risks on global economic stability and corporate earnings. The growing instability in the Middle East has injected fresh volatility into financial markets already grappling with concerns over slower global growth and inflationary pressures.
In the Asia-Pacific region, the Australian and New Zealand dollars showed surprising strength, buoyed by rising export demand and the ripple effects of a strong rally in Chinese equities. Recent stimulus measures from Beijing aimed at boosting economic growth have sparked renewed optimism among traders, with the enthusiasm spilling over into other asset classes in the region.
The immediate outlook for markets remains clouded by geopolitical uncertainties, with traders closely monitoring any developments in the Israel-Iran conflict, as well as signals from major central banks on potential monetary policy shifts. With risk sentiment on edge, further escalation in the Middle East could see additional upward pressure on oil prices and continued gains in haven assets such as gold.