13.06.2025 20:16
Global markets experienced a significant downturn Friday morning, fueled by escalating geopolitical tensions following Israeli strikes on Iranian nuclear facilities. The fear of a wider conflict sent shockwaves through the financial world, impacting various asset classes in different ways.
Oil prices skyrocketed in response to the news, with Brent crude experiencing an initial surge exceeding 8%. While West Texas Intermediate crude saw an even more dramatic initial jump of 14%, it later retreated slightly after reports emerged from Iran downplaying the damage to its oil infrastructure. This volatility highlighted the market's sensitivity to potential disruptions in global energy supplies.
The uncertainty surrounding the situation prompted investors to seek refuge in safe haven assets. Gold, a traditional safe haven, neared its all-time high, reflecting investors' anxiety. Simultaneously, the stock market experienced a notable decline, with the S&P 500 and Nasdaq Composite indices closing down 0.8% and 0.9% respectively by 2 p.m. ET. This risk-off sentiment also impacted Bitcoin, which mirrored the broader market trend by trading 0.6% lower at approximately $105,200 by the same time.
The increased oil prices impacted Treasury yields, which rose. This unexpected movement indicates that investors fear higher oil prices will exacerbate inflation, potentially influencing the Federal Reserve's monetary policy decisions. Although Treasury prices typically rise during geopolitical uncertainty (due to their inverse relationship with yields), the inflationary pressures introduced by higher oil prices could delay or prevent any potential interest rate cuts by the Fed.
The anticipation of a Federal Open Market Committee (FOMC) rate cut in the near future was initially high, with market expectations for a 25 basis point cut in September reaching 59% on Thursday. However, the escalating tensions caused a slight decrease to 56% by Friday morning, according to CME Group data. This subtle shift reflects a growing concern among traders that the Fed might maintain higher interest rates for an extended period to combat potential inflationary pressures stemming from the rising oil prices. The situation underscores the interconnectedness of geopolitical events and the intricate dance of global financial markets.
