Iran’s attack on Israel strains the market and makes oil more expensive

Iran’s response last Saturday night to Israel’s alleged attack on the Iranian consulate in Syria on April 1, which killed seven military commanders in Damascus, was immediate. Israel woke up on Sunday after supporting the shipment of 300 drones and cruise and ballistic missilesof which the Israeli Prime Minister, Benjamin Netanyahu, with the help of the United States, the United Kingdom and other allies, managed to intercept 99%, without the attack causing any casualties.

Iran ended its actions and Israel reopened its airspace, which it closed at midnight, but it appears that the Israeli War Cabinet is studying a possible retaliation, to which Iran warned of a much greater response if such a threat becomes reality. .

In this context of tension in the Middle Eastthe markets expect a difficult opening week due to the situation of escalation in international conflicts. Investors, who have been suffering from persistent inflation and interest rates that, given this situation, do not expect a decrease in the short term, will suffer a new session of volatility on Monday.

And with the beginning of the conflict between Palestine and Israel, the market’s greatest fear was that Iran would fully enter the war. This fear increased when Hamas, the Palestinian paramilitary terrorist organization, attacked Israel in October. With the apparent inclusion of Iran, it is now expected that a barrel of oil can exceed 100 dollars and a flight towards safer values, such as Treasury Bonds, gold and the dollar, is expected, causing greater losses in the stock market, according to Bloomberg.

In fact, the gold market has been on the rise, gaining 13% throughout this year to reach a price above $2,400 per ounce. As for the dollar, the currency rose 1.3% last week, the best performance since the end of 2022.

There is, therefore, a some concern with Israel’s decision on possible retaliation despite the fact that Iran has “concluded the matter,” although it is true that the White House is not in the mood to support a counterattack at the moment. This was communicated by President Joe Biden to Netanyahu, through a report drafted by the North American country.

In this time of uncertainty, investors naturally turn to safer assets. However, this may lead to new opportunities to purchase risky assets at lower prices. “Everything will depend, to some extent, on Israel’s response to what happened this weekend,” said Patrick Armstrong, chief investment officer at Plurimi Wealth LLP, reported by Bloomberg. For example, Bitcoin plunged almost 9% in the face of Saturday’s attacks, although it recovered on Sunday to trade near the $64,000 mark.

However, the Middle East markets did not wake up as if it were an escalation in the conflict, but rather with relative calm since the attack was announced, as well as its innocuous outcome without deaths or damage due to the defense of Israel. .

The dilemma comes in the crude

On the other hand, the markets’ concern reappears in the oil and energy. Last Friday, a barrel of Brent, the reference crude oil in Europe, already closed the session around $91, 1.3% more than the previous day.

To this we must add the kidnapping last Saturday of a cargo ship linked to an Israeli company in the Gulf of Oman, when sailing through the Strait of Hormuz. This location separates Iran to the north from the United Arab Emirates and Oman to the south, and is a vital enclave for global shipping, especially the shipping of crude oil and liquefied natural gas.

The occurrence of this kidnapping could create a dangerous precedent for the market known as “black gold.” In the event that transportation along this route is interrupted, The alternative is a much longer route that is not practical., due to the increase in costs that would cause higher inflation. Up to a third of the world’s crude oil circulates through this strait, so an interruption of circulation in this area would cause delays in the supply of oil and, therefore, an escalation in prices.

Currently, the price of Brent is at its highest since October last year and, so far this year, it has risen almost 19% due to production cuts and fear of supply interruptions. The Organization of Petroleum Exporting Countries (OPEC) maintained consumption forecasts for this year and next, while the International Energy Agency (IEA), an organization dependent on the OECD and which brings together more consumers than producers, He denied the biggest problem, relying on the popularity of the electric car. The markets, not very convinced, are still waiting for the short.