Global Markets Recover After Israel Strikes Iran, Triggering Volatility

Global stock markets experienced fluctuations on Friday following reports of an Israeli air strike inside Iran late Thursday night. The attack initially triggered a spike in oil prices and a rush to safe-haven assets like gold, unsettling investors before the opening bell in New York.

However, markets recovered as both Israel and Iran minimized the incident, suggesting neither side wants to intensify the situation into a full-scale regional conflict. Iran's Foreign Minister Hossein Amir Abdollahian downplayed the significance of the attack, saying Israel "tried to make victory out of their defeat." A senior Iranian official also stated that there were no plans to respond against Israel.

The S&P 500 and Nasdaq Composite indexes, which had retreated in early trading, exhibited a fluctuating response to the Israeli strike but rebounded as it became clear the attack was more symbolic than substantial. Brent crude and US crude futures also reversed earlier gains. Analysts noted that the limited scope of the Israeli attack and the muted response from both sides helped ease global market apprehensions triggered by the strike.

Why this matters: The Israeli air strike and subsequent market reaction highlight the sensitivity of global financial markets to geopolitical events, particularly in the Middle East. The incident also underscores the delicate balance of power between Israel and Iran, and the potential for their long-running conflict to impact the wider region and global economy.

Despite the global stock market fluctuations, Indian markets rallied on Friday, led by gains in banking and auto stocks. The Sensex gained over 600 points, or 0.83%, while the Nifty 50 closed 151 points, or 0.69%, higher. This came despite weak revenue guidance from IT giant Infosys.

World leaders, including the G7 and the European Commission, had called for calm and de-escalation of tensions following the Israeli strike. The U.S. and other Western powers urged Israel to avoid intensifying the conflict. U.S. officials said they did not intend for U.S. forces to join in any Israeli retaliatory action. As one senior U.S. official put it, "We're not looking to have a fight with Iran, but we're fully prepared to respond if Iran decides to retaliate."

Key Takeaways

• Global markets fluctuated after an Israeli strike on Iran, but later recovered.
• Both Israel and Iran downplayed the incident, easing market apprehensions.
• Indian markets rallied despite weak guidance from IT major Infosys.
• World leaders called for calm and de-escalation of tensions after the strike.
• U.S. officials stated they do not seek a fight with Iran but are prepared to respond.