Israel launched a series of airstrikes on Iran, causing significant turmoil in financial markets and driving energy prices higher. The Dow Jones Industrial Average fell 769.83 points, or 1.79%, to close at 42,197.79. The S&P 500 dropped 1.13% to 5,976.97, and the NASDAQ Composite lost 1.30%, settling at 19,406.83.
The market’s downward trend began after Israeli Defense Minister Yoav Gallant declared a special state of emergency following the airstrikes. U.S. officials confirmed that the United States was not involved in the attacks. Oil prices surged by more than 7%, with West Texas Intermediate (WTI) crude oil nearing $74 a barrel.
Gold prices also rose as investors sought safe-haven assets. This conflict compounds the already extensive list of challenges facing the markets,” said Mark Malek, Chief Investment Officer of Siebert Financial. “The spike in crude oil prices, if sustained, will have an immediate impact on inflation.”
President Donald Trump urged Iran to negotiate via a post on his social media platform, Truth Social.
“There has already been great death and destruction, but there is still time to make this slaughter end. Iran must make a deal before it is too late,” Trump wrote. The University of Michigan’s consumer sentiment index saw a notable increase, rising to 60.5 in June, which was higher than the Dow Jones estimate of 54 and represents a 15.9% increase from the previous month.
As Israel and Iran escalate their conflict to war, the price of oil is rising, significantly affecting energy and fuel costs, food prices, and spending on infrastructure and welfare programs in Asia. According to leading economics researcher Joaquin Vespignani, associate professor in finance at the University of Tasmania, this could lead to higher prices for consumers across Asia. “For Asian nations, there is no real alternative to oil from the Gulf states, meaning volatility in that region is likely to cause pressure thousands of kilometers away,” Vespignani said.
oil supply concerns heighten inflation risks
Indo-Pacific countries that rely on oil imports would have to spend more, but many do not have the resources to keep borrowing without cutting spending in other areas. Prices have already spiked following the US bombing of an Iranian nuclear site.
A squeeze on oil supplies could have serious ramifications for countries like Indonesia, which have provided fuel subsidies to their citizens. Vespignani forecasts that under high-risk scenarios, Brent crude could exceed $ US$100 per barrel if supply from Iran is disrupted and strategic transport routes are compromised. If the United States becomes further involved, a significant and sustained rise in oil prices is likely to occur into 2025.
India, Indonesia, and most Southeast Asian nations are highly dependent on imported oil, much of it sourced from the Middle East. If prices rise by $US10–20/barrel over a sustained period, this would widen current account deficits, increase fuel subsidies, and feed into broader inflation. The Strait of Hormuz is the world’s most critical oil chokepoint, with about 20 percent of global oil flows passing through it.
If Iran were to block or significantly restrict shipping, crude oil prices could surge well above $ US$90–105 per barrel, depending on the duration and severity of the blockade. According to Daniel Ghali, a senior commodity strategist at TD Securities, the spike in oil prices may soon stall and reverse course if the Israel-Iran conflict does not widen. Historically, geopolitical risks typically faded within one month and completely evaporated within six months, in line with subsequent macroeconomic headwinds and the deployment of spare capacity.
In 14 similar events since 1948 identified by TD Securities, it took an average of 2.36 months for oil prices to peak, with an average increase of 17%. West Texas Intermediate crude oil futures rose more than 7%, and prices have increased over 20% throughout June thus far. Most Wall Street commentary from central investment banks suggested a narrow conflict with a limited, short-term impact on oil prices.
However, Jan Stuart, Piper Sandler’s global energy strategist, stated, “We would not fade any oil price rally; this is war.”
