Markets rattled by mounting geopolitical risks

• Geopolitical risks mount as US joins Israel-Iran conflict 

• Brent opens almost 6% higher supply disruption fears 

• Bitcoin sheds over 4% from Friday, dipping below $100,000

• Risk-off mood may boost – USD, JPY, CHF & Gold 

Early on Sunday, the United States joined Israel’s war against Iran by launching airstrikes on three nuclear sites. 

Note: It was only last Thursday that Donald Trump set a two-week deadline to decide whether the US would strike Iran or not.

This unexpected development sparked risk aversion, with Bitcoin being the first victim of investor jitters.

As expected, markets kicked off Sunday evening with significant price gaps from Friday’s close. 

However, one of the biggest movers was Brent oil which opened almost 6% higher at over $80 a barrel!

Note: calculations based on Bloomberg's pricing using Friday’s closing price to Sunday evening's open. 

• Brent: ↑ 5.7%

• Crude: ↑ 4.6%

• XAUUSD: ↑ 0.6% 

• USDInd: ↑ 0.4%

• Bitcoin: ↓ 4%

• USDJPY: ↑ 0.4%

Asian shares are under pressure during early trading while European and US futures are flashing red. 

Risk-off could remain the name of the game this week as the world awaits Iran’s response to the United States. 

Why did oil benchmarks spike?

Markets are becoming increasingly concerned about tensions disrupting supply from a region that produces around a third of the world’s crude. 

But most importantly, Iran’s parliament has voted to close the vital Hormuz shipping channel in retaliation against Trump’s attack. It’s worth noting this is a key checkpoint for global crude, accounting for a fifth of the world’s daily output. 

So, if geopolitical tensions continue to mount and the Strait of Hormuz is blocked, Brent could rally beyond $80.

Note: Brent prices are bullish on the daily timeframe, jumping toward the 2025 high. The next psychological levels can be found at $90 and $100. 

Potential scenarios:

Should the conflict in the Middle East worsen, risk aversion could dominate global financial markets. 

• The biggest winners could be safe-haven assets: USD, JPY, CHF and Gold.

• The losers are likely to be risk assets: global equities and cryptocurrencies

Any signs of easing tensions between Israel-Iran could soothe investor anxiety and support sentiment. 

• A reduced appetite for safe-haven assets may hit: USD, JPY, CHF and Gold may weaken. 

• A return of risk appetite may support: global equities and cryptocurrencies.