US stock prices fell Tuesday after the announcement that Iran launched missiles against Israel.
The Dow Jones Industrial Average fell by 238 points or 0.4%. Meanwhile, the S&P 500 dropped 1.1%, and the Nasdaq Composite plunged 1.9%.
West Texas Intermediate crude rose after Israel Defense Forces reported that Iran had fired missiles against Israel.
The CBOE Volatility Index, also known as Wall Street’s Fear Gauge (VIX), jumped over 20 in response to increased concerns from traders.
Iran’s rocket attack causes shockwaves
At a time of high inflation, and fear for an economic downturn in the world economy, this attack against Israel is particularly shocking.
Iran launched missiles in response to Israel’s invasion of southern Lebanon which was aimed at Hezbollah – a militant group backed by Iran.
The Israel Defense Forces have confirmed that the missiles launched by Iran were the ones which prompted the warnings to people to take shelter as soon as possible.
The Dow Jones fell sharply in the middle of the day, a quick reaction from financial markets.
Investors scrambled as they adjusted their portfolios to respond to geopolitical events. The S&P 500 fell by over 1.4% and the Nasdaq dropped more than 2%.
The rising price of oil has benefited energy stocks, while other sectors such as consumer products and technology have seen significant drops.
Stock market impact of Middle East tensions
Conflicts in the Middle East historically have profoundly affected global markets. This is especially true for oil prices and stockpiles of defense equipment.
Investors are bracing themselves for supply disruptions that could cause even greater volatility in the energy industry.
The general market decline reflects uncertainty about the possible ramifications.
Defense stocks rose in the early morning trading as tensions between Iran and Israel increased.
Following speculations that increased spending on military equipment could result from the war, major defense contractors such as Lockheed Martin, Raytheon Technologies and Raytheon Technologies have seen gains.
Investors shifted away from riskier assets such as gold and bonds to safer ones, like retail and the hospitality sector.
US crude prices rose over 5% following the missile attack by Iran on Israel on Tuesday.
Brent December contracts rose 5.03%, to $75.31 a barrel. West Texas Intermediate November contracts climbed to $71.74 – a 5.24% gain.
Source: CNBC
Defensive strategys gain in momentum
Investors have adopted more defensive strategies in light of growing risks.
Gold prices rose by more than 1% after the attack, a safe-haven asset.
Bonds also benefitted as investors shifted away from more risky assets such as equities.
Exchange-traded fund (ETF) that focus on the Defense sector also saw an increase in capital, as investors sought to gain exposure to firms likely to profit from increased spending.
The post Dow falls 200 points and Nasdaq plummets almost 2% after Iran launches missiles against Israel could be updated as new information becomes available
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