Stocks slide, oil prices rise as Israel attacks Iran’s nuclear sites, kills military leaders

Global financial markets were thrown into turmoil on Friday after Israel launched major military strikes on Iran, targeting nuclear sites and missile infrastructure.

The offensive marked a sharp escalation in tensions across the Middle East, rattling investors worldwide and sending oil prices soaring.

According to Reuters, Brent crude briefly surged by 14% to reach $79 a barrel before retreating to around $74, still up over 5% for the day. U.S. West Texas Intermediate crude climbed to $73.15, also marking a more than 7% increase—both contracts recording their biggest one-day gains since Russia’s invasion of Ukraine in 2022.

Gold prices rose sharply, hitting $3,416 per ounce and edging closer to the all-time high of $3,500.05 reached in April. The heightened volatility pushed investors toward safe-haven assets such as the U.S. dollar and the Swiss franc, while government bonds in both the U.S. and Europe saw yields fall as demand surged.

Israel Attacks

Israel launched a major attack on Iran early Friday, striking sites linked to Iran’s nuclear programme and killing at least two senior Iranian military officials, including Revolutionary Guard leader Gen. Hossein Salami and Iran’s armed forces chief, Gen. Mohammad Bagheri It also killed top Iranian nuclear scientists.

The attack, involving about 200 Israeli aircraft and reportedly assisted by Mossad-coordinated explosive drones, marked one of the most significant strikes against Iran since its 1980s war with Iraq. Black smoke was seen rising from Iran’s Natanz nuclear facility, with Israel later claiming to have destroyed dozens of missile launchers and radar systems.

Iran quickly retaliated by launching over 100 drones at Israel, with some flying over Iraq and Jordan. Israel said it was intercepting the drones outside its airspace.

The escalation heightened fears of a broader Middle East war. Regional governments condemned Israel’s strikes, while global leaders urged restraint. The U.S., which warned against Israeli action amid ongoing talks over Iran’s nuclear program, denied involvement but had earlier evacuated some diplomats from Iraq, signaling foreknowledge of possible conflict.

Iran’s Supreme Leader Ayatollah Ali Khamenei vowed “severe punishment,” while analysts warned that Tehran could target not just Israel but U.S. interests in the region, raising concerns of a wider confrontation.

More Impact

The Israeli military said its strikes aimed at dismantling Iran’s nuclear weapons capability. “We targeted key nuclear facilities, missile factories, and senior military command positions,” an Israeli army spokesperson said. Iran responded by launching around 100 drones at Israeli targets, according to Israeli officials.

While tensions mounted, the United States distanced itself from the Israeli offensive. U.S. Secretary of State Marco Rubio described it as a “unilateral action” by Israel, emphasizing that Washington was not involved but warning Iran against retaliating against American interests.

The economic implications of a wider conflict weighed heavily on markets already struggling with geopolitical and economic pressures, including uncertainty surrounding U.S. interest rates.

“The geopolitical escalation adds another layer of uncertainty to already fragile sentiment,” said Charu Chanana, chief investment strategist at Saxo Bank, speaking to Reuters. “If tensions persist, crude oil and safe-haven assets are likely to remain on an upward path.”

Concerns grew over potential disruption to the Strait of Hormuz, a key chokepoint through which nearly a fifth of the world’s oil passes. Analysts at JPMorgan warned that if shipping through the Strait were blocked, oil prices could spike to between $120 and $130 per barrel, nearly double their current levels.

Despite the immediate turmoil, some analysts were cautious about predicting a prolonged crisis. “There’s a lower probability of a full-blown war, and the oil price rally may soon encounter resistance,” said Janiv Shah of Rystad Energy.

Equity markets reflected the anxiety. U.S. stock futures dropped over 1.5%, European shares opened more than 1% lower, and major Asian indexes also fell. “Traders are now on edge over the prospects of a full-blown Middle East conflict,” Matt Simpson of City Index told Reuters. “That will keep uncertainty high and volatility elevated.”