Global Markets React to Escalating US-Iran Tensions

The US dollar surged on Monday as investors sought safety amid rising geopolitical risks following US military strikes on Iran. The euro weakened, and most major currencies in Asia followed suit. Crude oil prices rose, reflecting concerns over potential disruptions to energy supplies, while US equity futures declined. Treasury yields fell slightly after an initial uptick, signaling a cautious market mood.

Market analysts suggest the reaction remains tempered, with expectations that the conflict may not yet broadly impact the global economy. However, a severe escalation, such as Iran blocking the Strait of Hormuz—a critical route for oil and gas—or targeting US forces, could amplify market volatility. Iran has promised a strong retaliation, raising fears of further instability in the region.

Analysts at JPMorgan also cautioned that past episodes of regime change in the region typically resulted in oil prices spiking by as much as 76% and averaging a 30% rise over time. "Selective disruptions that scare off oil tankers make more sense than closing the Strait of Hormuz given Iran’s oil exports would be shut down too," said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia.

Despite the uncertainty, some investors are prepared for worsening tensions, limiting sharp market declines. Global stock indices have only modestly retreated since the conflict intensified. Reduced stock holdings and increased hedging activity suggest a deep selloff is unlikely for now. Analysts note that US assets may still retain safe-haven appeal, but the trajectory depends on how the situation unfolds.