Top story for the morning: oil rises in price due to increased risks, gold moves to a record high

Oil prices rose sharply after Israeli attacks on key gas facilities in Iran and Tehran's threat to close the Strait of Hormuz, a critical route for global energy trade. At the same time, gold jumped to near-record levels - to $3440 per ounce - amid demand for protective assets and expectations of rate cuts by the Federal Reserve. Currency markets reacted by strengthening the dollar, caused by the demand for a «safe haven». About these and other topics - in our review of key events for the morning of June 16.

Oil futures rose sharply in early trading Monday on heightened fears that escalating conflict between Israel and Iran will lead to widespread supply disruptions, wrote Bloomberg. Brent soared 5.5 percent to $78.3 a barrel but later lost most of its gains.

Israeli drones attacked Iran's South Pars gas field, one of the world's largest, on Saturday, according to Iranian media reports. The Jerusalem Post's sources reported that Israel also attacked a major oil storage facility near Tehran. Meanwhile, according to data from The Times of Israel, Iranian missiles damaged a major oil refinery in Haifa.

An Iranian commander also said Tehran is considering closing the Strait of Hormuz, through which about 20% of the world's oil passes. In case of its closure, oil prices could exceed $100 per barrel, according to analysts at Goldman Sachs.

However, some experts doubt that Iran is capable of closing the strait. «I've heard estimates that it would be extremely difficult for Iran to close the Strait of Hormuz because of the presence of the U.S. Fifth Fleet in Bahrain,» Helima Croft, head of commodities strategy at RBC Capital Markets, told CNBC. - But they could attack tankers or mine the strait.»

The cost of gold approached an all-time high as escalating conflict between Israel and Iran prompted investors to seek refuge in defensive assets, reports Bloomberg. The precious metal rose 0.6 percent in Asian trading, rising to around $3450 an ounce - just $50 below April's record. 

A sharp rise in geopolitical risks due to the military escalation of the conflict between Israel and Iran intensified the rally, which was initially driven by fears of a slowdown in global economic growth amid Donald Trump's aggressive duty policy. Since the beginning of the year, gold has risen in price by more than 30%, with one of the key factors remaining the desire of central banks to diversify away from the dollar.

«Prices are still very close to record levels and any further escalation will push them higher,» said Guardian Gold Australia analyst John Feeney. - «Gold is doing a great job as a safe haven right now, and it looks like many investors are reallocating funds from U.S. bonds into the metal for the long term.»

As of 9:14 a.m. Singapore time, the spot price of gold was up 0.3% to $3,441.35 an ounce. The Bloomberg Dollar Spot Index rose 0.1 percent after falling 0.8 percent over the previous week. Silver fell slightly, while platinum and palladium rose in price.

The dollar strengthened against other major global currencies on Monday amid increased safe haven demand from investors concerned that the conflict between Israel and Iran could escalate into a broader regional confrontation, reports Reuters. Meanwhile, the market is gearing up for a busy week of central bank meetings.

On Monday, the dollar rose 0.14% to 144.3 yen, while the euro weakened 0.14% to $1.1534. In early trading in Asia, the dollar held steady against the Swiss franc at 0.81, while the dollar index (against six major currencies) was steady at 98.25.

Risk-sensitive currencies such as the Australian and New Zealand dollars showed slight gains. «The dollar's role as a defensive asset will be severely tested, and recent rate fluctuations confirm this,» said Win Tin, head of global markets strategy at Brown Brothers Harriman. - «If the Fed issues a 'soft' statement, as we expect, the dollar is likely to resume its decline due to deteriorating fundamentals in the US.»

The U.S. currency has lost more than 9% of its value since the start of the year as investors are nervous about Trump's looming deadline on trade agreements, which expires in three weeks. Negotiations with key partners such as the EU and Japan are still pending.

This week, investors will be watching for possible agreements on the margins of the G7 summit in Canada. Also in focus is a series of central bank decisions on monetary policy, especially the Federal Reserve meeting on Wednesday.

Shares of Australian oil and gas company Santos rose 15.23% on Monday after receiving a non-binding $18.72 billion purchase offer from a consortium led by Abu Dhabi National Oil Company (ADNOC), reports CNBC. This is the biggest intraday rise in the company's shares since April 2020.

The offer came from ADNOC's investment arm, XRG, and is the third since the end of March. The consortium includes Abu Dhabi Development Holding Co and global investment firm Carlyle Group. It is offering $5.76 per Santos share (A$8.89), up 27.73% from Friday's closing price.

Santos' board said it intends to unanimously recommend that shareholders approve the deal unless a better offer is made.

XRG is actively seeking assets in natural gas, chemicals and low-carbon energy. Santos has previously rejected purchase offers, including from Harbour Energy, and a merger with Woodside Energy Group fell through due to valuation disagreements. Nevertheless, the company remains an attractive target, especially for Middle Eastern investors.

The takeover will give the consortium control of two Australian LNG plants, Gladstone LNG and Darwin LNG, as well as stakes in PNG LNG and Papua LNG.

Asia-Pacific markets moved mixed on Monday as investors assessed escalating tensions between Israel and Iran and analyzed fresh data from China, including retail sales and industrial production for May, reports CNBC.

 - Mainland China's CSI 300 index remained largely unchanged, while Hong Kong's Hang Seng Index fell 0.18%.

 - Japan's Nikkei 225 index was up 0.95%, while the broader Topix index was up 0.56%.

 - In South Korea, the Kospi index added 0.72% and the small-cap Kosdaq index rose 0.55% amid volatile trading.

 - Futures on major U.S. stock indexes rose slightly in the morning hours in Asia. All three key Wall Street indexes fell sharply Friday as attacks between Israel and Iran sent energy prices soaring and added uncertainty to an already tense geopolitical environment. The Dow Jones Industrial Average fell 1.8 percent. The S&P 500 index was down 1.1%, while the Nasdaq Composite lost 1.3%.