Oil surged, stocks fell and investors sought safety in the US dollar and government bonds Friday after Israel struck Iranian nuclear and military targets in an attack that raised the risk of war between the two countries and broader instability in the Middle East.
Futures for the S&P 500 fell 0.9% before the opening bell, while futures for the Dow Jones Industrial Average were down 1%. Nasdaq futures slid 1.1%.
US benchmark crude oil rose by $4.73, or 6.9%, to $72.77 per barrel, its biggest gain since the early days of Russia's attack on Ukraine more than three years ago. Brent crude, the international standard, climbed $4.58 to $73.94 per barrel, also the largest single-day jump since the Russian invasion, reports AP.
Oil prices are likely to rise in the short term but the key question is whether exports are affected, said Richard Joswick, head of near-term oil at S&P Global Commodity Insights.
Asian shares slide while oil prices surge after Israel's strike on Iran
“When Iran and Israel exchanged attacks previously, prices spiked initially but fell once it became clear that the situation was not escalating and there was no impact on oil supply,” he wrote in an emailed analysis.
“Oil price risk premiums could rise sharply if Iran conducts broader retaliatory attacks, especially if on targets other than in Israel,” Joswick said.
China is the only customer for Iranian oil but could seek alternative supplies from Middle Eastern exporters and Russia, he said.
Trump urges Iran to make nuclear deal as conflict with Israel escalates
Iran's oil trade is restricted by Western sanctions and import bans, and Israel exports only small amounts of oil and oil products.
Boeing shares are down 1% after falling nearly 5% Thursday when one of the aerospace giant's planes crashed in India, killing all but one of the 242 people on board as well as several on the ground. The plane operated by Air India was the first fatal crash of a Boeing 787 Dreamliner since it went into service in 2009.
GE Aerospace, which makes engines for Boeing, is down close to 2% after it announced it was postponing next week's investor day in light of the tragic crash.
In Europe at midday, Germany’s DAX dropped 1.3% and the CAC 40 in Paris gave up 0.9%. Britain’s FTSE 100 slipped 0.2%.
The yield on the 10-year Treasury fell to 4.35% from 4.41% late Wednesday and from roughly 4.80% early this year.
In currency trading early Friday, the US dollar rose to 144.12 yen, while the euro eased to $1.1511. The yield on US 10-year Treasurys fell to 4.35%. Bond yields and prices move in opposite directions.
Treasurys and the dollar often rise when investors feel less inclined to take risks.