Oil jumps nearly 7% after Israel hits Iran. Investors rush to safe assets amid fears of Middle East conflict and energy market instability.
Israeli Strike on Iran Triggers Market Turmoil
Global markets reacted sharply on Friday, June 13, after Israel launched strikes on Iranian nuclear and military sites, escalating tensions in the Middle East. The offensive, aimed at deterring Iran’s nuclear capabilities, has raised fears of a broader regional conflict that could impact global energy supplies.
Crude Oil Sees Largest Jump Since Ukraine Invasion
Oil prices soared as the market braced for potential supply disruptions. U.S. benchmark crude surged by 6.9%, or $4.73 USD, reaching $72.77 per barrel — its steepest gain since Russia invaded Ukraine in early 2022. Brent crude followed, rising $4.58 to $73.94 USD per barrel.
Energy analysts, including S&P Global’s Richard Joswick, suggest that while immediate disruptions to oil exports are unlikely, the risk premium could rise “sharply” if Iran retaliates beyond Israeli targets.
Stock Indices Fall as Investors Shift to Safe Havens
The threat of escalation triggered a sell-off on major stock markets. By 10:05 a.m. ET, the S&P 500 had fallen 0.9%, while the Dow Jones dropped 601 points (1.4%). The Nasdaq Composite was also down 0.9%. Investors flocked to safe-haven assets, pushing U.S. Treasury yields lower and lifting demand for the U.S. dollar and gold.
The 10-year Treasury yield fell to 4.35% from 4.41% earlier in the week, reflecting a decline in investor appetite for risk.
Analysts Warn of Potential Global Economic Fallout
While Israel and Iran are not major oil exporters to Western markets, analysts caution that the psychological impact on oil prices could be significant. Goldman Sachs updated its summer 2025 outlook to include a higher geopolitical risk premium but maintained expectations for no major supply disruptions.
Rystad Energy’s Janiv Shah added that the rally may be short-lived unless the situation escalates. “There is a lower probability of a full-blown war, and the oil price rally will likely encounter resistance,” Shah said.
Canadian and Global Implications
For Canadian consumers and businesses, a sustained increase in oil prices could raise transportation and heating costs, further challenging inflation control. Canada, as a major oil exporter, may benefit from higher crude prices in the short term, but global instability could dampen investment confidence.
The economic institute DIW Berlin warned that surging oil prices may also impact Europe, especially Germany, which is already struggling with stagnant growth.
Uncertainty Looms Over Next Steps
The international community is watching closely to see whether Iran responds militarily. Any expansion of the conflict could significantly strain global oil supply routes and heighten volatility in energy and financial markets.
As tensions rise, Canadian investors are advised to monitor geopolitical developments closely while diversifying risk and focusing on long-term fundamentals.
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