The price of oil and gold has soared and stock markets have fallen after Israel’s strikes against targets in Iran.
The escalation of the conflict in the Middle East, the focal point of global oil production, prompted a sharp increase in wholesale prices. Brent crude surged by more than 7% after news of the attacks broke, briefly moving above $75 (£55) a barrel to its highest level since April.
News of the strikes also affected the aviation industry, as airlines cleared the airspace over the region, while investors turned to safe investment assets such as gold.
The British Airways owner, IAG, was the top faller on London’s FTSE 100, closing 3.7% down, and shares in the airline easyJet ended the day 2.7% lower.
One of the top risers on the UK blue-chip index was the weapons producer BAE Systems, up almost 3%, reflecting concerns that the Israel-Iran conflict could escalate. The oil companies BP and Shell also gained value, with the former closing nearly 2% up and the latter closing just over 1% higher.
The price of gold was trading about 1% higher on Friday afternoon at $3,426 an ounce, close to the record high of $3,500 it hit in April.
“The geopolitical escalation adds another layer of uncertainty to already fragile sentiment,” said Charu Chanana, the chief investment strategist at Saxo. Stocks dived in Asia, with Japan’s Nikkei down 1.3%, South Korea’s Kospi falling 1.1% and Hong Kong’s Hang Seng dipping 0.8%.
In Europe, major markets across Germany, France, Italy and Spain all closed at least 1% down. In London, the FTSE 100 ended the day down 34 points at 8,850, 0.4% below Thursday’s record closing high.
US markets followed suit, with Wall Street’s major indices falling during morning trade on Friday, as airline stocks including Delta, United and American declined on fears that fuel costs could climb if there were issues with oil supply.
Israel, which said its attack was a “pre-emptive strike” over Iran’s nuclear programme, has declared a state of emergency as its military said Tehran had launched 100 drones in retaliation.
Marco Rubio, the US secretary of state, called Israel’s strikes against Iran a “unilateral action” and said Washington was not involved.
The move to perceived safe haven assets has resulted in the yield on 10-year US Treasury notes falling to a one-month low of 4.31%.
Derren Nathan, the head of equity research at Hargreaves Lansdown, said: “It’s not just the outlook for Iranian exports that’s a concern but also the potential for disruption to shipping in the Persian Gulf’s strait of Hormuz, a key route for about 20% of global oil flows and an even higher proportion of liquified natural gas haulage.”
