Oil at $100 and a flight to «safe havens»: what to expect on Wall Street after US strikes on Iran

The U.S. on the night of June 22 joined Israel's attacks on Iran, hitting three key sites in Iran's nuclear program. President Donald Trump, who just the other day took two weeks to make a decision, said the U.S. had «finished» bombing Iran's uranium enrichment plants and hoped the U.S. military's involvement would no longer be needed. At the same time, he threatened more attacks if Tehran did not make peace. Arab diplomats have conveyed to Iran that it is time for it to return to negotiations, sources told The Wall Street Journal. Iran in turn declared that it was «reserving all options for defense» and fired again at Israel on the morning of June 22. 

The escalation of the conflict with the US intervention will certainly lead to a jump in oil prices - analysts are generally unanimous in their opinion that oil futures trading will open with growth after the weekend. They do not make long-term forecasts - everything will depend on further actions of the parties involved. But the level of risk on the markets has increased, which will push investors to flee to protective assets, believe on Wall Street;

- «I think the markets will be alarmed at first and oil trading will probably open higher. We don't have a damage assessment yet, it will take some time. Even though he [Trump] has said it's 'finalized,' we're still involved. What's going to happen next? I think uncertainty will hit the markets, because now Americans everywhere will be at risk. That will increase instability and volatility, especially in the oil market,» considers Potomac River Capital Chief Investment Officer Mark Spindel.

- «Oil prices are sure to soar on the back of this news, but will probably stabilize within a few days. After such a show of force and the complete destruction of their nuclear capability, the Iranians have lost all leverage and will likely try to get out of this by going for a peace deal,» admitted Harris Financial Group managing partner Jamie Cox.

- «An escalation could create enough pressure on Iran to back down and make a deal, which would reduce tensions and lead to lower oil prices,» notes MST Marquee energy analyst Saul Kavonik. - A more likely scenario: a U.S. strike could escalate the conflict, in which Iran could retaliate by striking U.S. interests in the region - including oil infrastructure in countries like Iraq, or by provoking the Strait of Hormuz. Much will depend on how Iran responds in the coming hours and days. But if it carries out its earlier threats, it could cause oil prices to rise to $100 a barrel.»

- «With the likelihood of a quick resolution to the conflict diminished, investors are likely to start reassessing risks in the markets. I expect a flight to safe-haven assets, a strengthening U.S. dollar and a general weakening of risk assets in Asia as markets assess the possible impact of sustained geopolitical instability and high oil prices,» predicts Ron Ren Guo, an asset manager at Eastspring Investments.

- «I think it's positive news for the stock market,» says Siebert Financial chief investment officer Mark Malek. - If I had been asked on Friday, I would have predicted two weeks of volatility, during which the markets will be trying to analyze every little thing from the White House, and I would have said it would have been better to have made the decision [to attack] as early as last week. What happened will have a stabilizing effect, especially given that this appears to be a one-off attack and the U.S. is not looking for a protracted conflict. The biggest risk remains the Strait of Hormuz. Things could change dramatically if Iran actually has the capability to close it.»

- «Markets want certainty, and this development puts the U.S. firmly in the Middle East theater. But I think it also means the U.S. Navy will be tasked with making sure the Strait of Hormuz is open,» notes former trader and global energy strategist at Rabobank Joe DeLaura. He predicts oil could rise to $80-90 a barrel.

- «What has happened adds a new level of risk that we will have to take into account and monitor closely. It will definitely affect energy prices and possibly inflation,» warns Cresset Capital Management investment director Jack Eblin.

- «There are many possible consequences, but it appears that the strikes were pinpointed, restrained and selective. If this is true, and Iran's oil export capacity has not been disrupted, then the economic consequences are likely to be limited. The Fed will perceive the short-term spike in oil prices not so much as a factor that increases spending and contributes to inflation, but as an additional «tax» on consumers that suppresses demand. I don't expect it to affect Fed decisions unless the rise in oil prices proves sustainable,» says Christopher Hodge, chief U.S. economist at investment bank Natixis.

- «Markets are focused on whether the war will spread to other countries and there is no evidence of that yet,» said Hasnain Malik, a strategist at Dubai-based Tellimer. - The favorable scenario is that U.S. intervention will hasten the end of the war. But of course, that remains to be seen.»

- «Perhaps the price of oil will rise short-term by 10-15% purely on hype and uncertainty. There are no signs that Iran's oil infrastructure is being destroyed. On its own will, Tehran will not stop oil exports because it is a huge amount of money flowing to the Iranian authorities every day. Reuters reports that Iran's oil exports have adapted to the war. Last week, it stood at 2.2 million barrels per day. That's about $160 million a day, $1.2 billion a week (if you count at the Brent price, Iranian oil traded at a slight discount relative to Brent). And this confirms the assumption that the war and oil trade go hand in hand,» said Oninvest analyst Konstantin Gnennyi.

- Cryptocurrency was the first to react to the escalation of the conflict: Ethereum was 7.7% cheaper at the moment, bitcoin briefly dipped below $101,000.

- In Israel and Saudi Arabia, traders ignored potential risks, with Israel's TA-35 index rising 1.2% on Sunday and Saudi Arabia's Tadawul All Share index adding 1%, wrote Bloomberg.

- Key stock and commodity markets are closed for now. Trading in oil futures and U.S. stocks will begin at 6 p.m. ET in the U.S.