The market is bracing itself for increased volatility following the announcement by the United States that it had launched “major military operations” against Iran.
It is possible that this development could have far greater consequences than the recent geopolitical upheavals, and it could change views about where to invest on a short-term basis.
Donald Trump, President of the United States, said that US forces had started “major combat operation” against Iran.
Unidentified Iranian officials told Reuters that several ministries were attacked in the southern part of Tehran.
Markets have reacted calmly to recent geopolitical events, including the US increase in tariffs from 10% to 15% for all imports as well as the arrest of Nicolas Maduro, former Venezuelan president.
Direct US military action against Iran could cause regional instability and force investors to reevaluate their investments if tensions rise.
Focus on oil as Strait of Hormuz threat looms
Investors weighing their options in the face of escalating geopolitical uncertainties are primarily influenced by oil markets.
The Strait of Hormuz is one of the most important energy chokepoints in the world. It connects the Arabian Peninsula with the oil-rich Iran.
Kpler data shows that in 2025 around 13 million barrels of crude oil per day will pass through the Strait, which represents roughly 31% global seaborne crude flow.
More generally, it is estimated that 20% of the global oil supply transits this passage.
Brent crude traded at $73 per barrel Friday, an increase of roughly 20% over the past year.
Analysts say that any interruption to the shipments via Hormuz may cause prices to rise significantly.
Brent rose to $80 a barrel during the 12-day conflict of June 2025 before falling as it became apparent that the flow through the Strait was not interrupted.
William Jackson, Chief Emerging Markets Economist at Capital Economics said that even if there is a resolution to the conflict, Brent may rise again, possibly up to $80.
He said that a prolonged conflict in the oil supply may push crude to $100 per barrel and add 0.6-0.7 percentage points of global inflation.
Some reports suggest that oil companies and major trading houses may have suspended fuel and crude shipments through the Strait of Hormuz in response to recent attacks. This could complicate the decision-making process for energy assets.
Flashing Volatility Indicators
This conflict could add to the market turmoil in an already turbulent year, which has been marked by uncertainty over tariffs and a steep sell-off in the technology sector. Investors may be unsure about whether to make investments in assets that are risky.
VIX, the volatility index for US bonds, has increased by about a third this year. The implied volatility of US bonds, as measured by MOVE, has increased by 15%.
The currency markets will also react. The Commonwealth Bank of Australia’s analysts noted that during the conflict in June, the US Dollar Index fell by about 1%. However, the movement reversed itself within a few days.
CBA analysts have previously stated that the amount of fall depends on the length and size of conflict.
The US has been a net exporter of energy, so if the oil supply is disrupted, it could lead to a strengthening in the US Dollar against other currencies, except for the traditional safe-havens like the Japanese yen or Swiss franc.
The shekel in Israel is expected to also move dramatically. It has fallen as high as 5% in previous crises before recovering.
The need for safe havens is growing
Investors are already focusing on safe-haven assets to determine where they should invest in times of geopolitical tension.
Investors are responding to the escalating tensions in geopolitics between Israel and Iran by increasing gold and silver prices.
According to analysts, fears about a wider conflict combined with uncertainty in the global economy and US inflation statistics are driving capital towards precious metals.
Silver has also risen strongly. Gold, which is currently trading at $5,300, is up by 22% in 2026.
A few market players are watching to see if gold can test $6,000 or silver could reach $200, if tensions continue to escalate.
Demand for US Treasuries has also increased, as yields have fallen in recent weeks.
Bitcoin, on the other hand, hasn’t acted like a safe haven. Bitcoin fell by 2% over the weekend and lost more than 25% of its value in just two months.
Economic implications for a broader audience
Investors are concerned about the inflationary effects of rising energy prices.
Venezuela is mentioned in the recent geopolitical events. It produces around 800,000 barrels of crude oil per day, which is far less than its peak production of 3.5 millions barrels of crude per day from 1990.
A further disruption on the global energy market could cause a tightening of supply.
Participants in the market say that the main variable will be whether or not the conflict is contained, or if it escalates to a disruption of regional stability and oil flow.
Oil remains the primary barometer for now. After an initial shock, the markets could stabilise if supply routes remain open.
Investors warn of sustained volatility for equities and currencies in the coming weeks if the Strait of Hormuz becomes compromised. Global investors will have to reassess their investment strategies in a macro-environment that is becoming increasingly unstable.
The post Markets prepare for volatility as US launches “combat operations” in Iran could be updated to reflect new information.
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