Middle East Conflict Sends Shockwaves Through Global Markets
LONDON — Escalating tensions in the Middle East are triggering a sell-off in global markets, as fears mount over a prolonged conflict between the United States and Iran. European stocks tumbled Tuesday, extending losses from the previous day, while oil prices surged amid concerns about potential disruptions to vital shipping lanes.
The pan-European Stoxx 600 index was down 1.8% by mid-morning in London, with banking, insurance, and utilities sectors leading the decline. Even aerospace and defense stocks, typically seen as beneficiaries of geopolitical instability, shed value. Germany’s DAX and Italy’s FTSE MIB indexes also experienced significant drops.
The market turmoil follows strikes across Iran, including in the capital Tehran, on Monday. The United States and Israel are actively involved in the escalating conflict, with the U.S. signaling that attacks could last weeks and intensify, according to the Associated Press.
Adding to the anxieties, Saudi Arabia’s defense ministry reported that two drones struck the U.S. embassy in Riyadh.
The conflict’s potential impact on global energy supplies is a major driver of market volatility. An Iranian Revolutionary Guard commander reportedly stated that the Strait of Hormuz – a crucial waterway for crude oil transport – is closed, threatening to ignite ships attempting passage, Reuters reported. This announcement sent crude oil prices soaring Monday, raising concerns about inflationary pressures.
Investors are flocking to safe-haven assets, with gold prices surging as a result of the risk-off sentiment. U.S. futures and Asian markets are also experiencing declines.
The situation remains fluid, and the long-term consequences of the conflict are uncertain. The lack of a clear end state to the conflict is fueling investor unease, as highlighted in a recent Los Angeles Times opinion piece.