US-Iran Strikes: Oil Surges, Markets Brace Volatility

The US-led airstrikes on Iran’s nuclear facilities on June 22, 2025, have propelled Brent crude futures to a five-month high of $81.40 per barrel, a 13% surge since June 13, reflecting heightened fears of oil supply disruptions through the Strait of Hormuz. This escalation, coupled with Iran’s threats of retaliation and China’s condemnation of the US action as damaging to its credibility, has injected significant volatility into global financial markets. The operation, dubbed Operation Midnight Hammer, aligns with the Trump Administration’s campaign promise to avoid large-scale wars while neutralizing Iran’s nuclear capabilities, but the risk of retaliatory actions introduces uncertainty across asset classes, particularly commodities and equities.

The immediate market response to the US and Israeli strikes has been a sharp rally in oil prices, driven by fears of supply disruptions in a region critical to global energy markets. Brent crude futures climbed 2.49% to $78.93 per barrel on June 23, after peaking at $81.40, while West Texas Intermediate (WTI) crude rose 2.56% to $75.73. Iran, as OPEC’s third-largest producer, accounts for a significant portion of global oil supply, and the threat of closing the Strait of Hormuz, through which 20% of the world’s oil flows, has heightened investor concerns. Iranian parliament’s approval of a motion to potentially close this chokepoint has fueled speculation of a supply shock, with Goldman Sachs projecting Brent prices could reach $110 per barrel if flows are halved for a month.

The US strikes have triggered divergent responses in global equity markets, reflecting varying interpretations of the geopolitical fallout. In the US, a risk-off sentiment has taken hold, with Dow futures dropping 152 points (0.36%), S&P 500 futures declining 0.39%, and Nasdaq futures falling 0.53% on June 23. This cautious stance stems from concerns that an escalation could disrupt global trade, increase energy costs, and pressure corporate earnings, particularly in sectors like technology and consumer discretionary. The uncertainty surrounding Iran’s response, including potential drone or missile attacks on US or Israeli targets, has dampened investor confidence in riskier assets.

Amid the geopolitical uncertainty, safe-haven assets have gained traction as investors seek stability. Gold prices rose 0.2% to $3,393.00 per ounce, reinforcing its status as a hedge against geopolitical and economic risks. The US dollar, typically a safe-haven currency, weakened slightly, falling 0.29% against the euro and 0.24% against the Japanese yen, reflecting concerns about US credibility following China’s sharp criticism of the strikes. China’s UN Ambassador Fu Cong emphasized that the US action has damaged its standing in international negotiations, prompting some investors to diversify into alternative safe-haven currencies like the yen.

The cryptocurrency market has shown muted responses to the geopolitical developments, with Bitcoin holding steady at around $99,700 and Ethereum at $3,500. Unlike traditional assets, cryptocurrencies are less directly tied to geopolitical events, but sustained volatility in traditional markets could drive speculative flows into digital assets as investors seek alternatives. However, the lack of significant movement suggests that crypto investors are not yet viewing the situation as a major catalyst for price action.

The Trump Administration’s emphasis on avoiding a broader war aligns with its campaign promise to minimize US military involvement abroad, but Iran’s threats of retaliation introduce significant uncertainty. Iran’s military capabilities have been weakened by the loss of top generals and nuclear infrastructure, reducing its ability to wage a conventional war. However, the potential for asymmetric responses, such as drone strikes or cyberattacks, could prolong market volatility. China’s condemnation, echoed by Russia and Pakistan’s calls for a UN ceasefire resolution, highlights the risk of diplomatic fallout, which could further complicate market dynamics.

The US strikes on Iran’s nuclear facilities have introduced a volatile phase for financial markets, with oil and equities at the forefront of investor concerns. The surge in oil prices presents opportunities for energy sector investments, with companies like ExxonMobil and Chevron likely to benefit from higher margins if prices remain elevated. However, investors should be cautious of a potential correction if OPEC+ ramps up production or if Iran’s retaliation remains limited to non-disruptive actions. Diversifying into safe-haven assets like gold or yen-denominated instruments can provide stability during this period of uncertainty.