Investors react to fresh military strikes between Iran and the U.S., pushing equities lower and oil prices higher ahead of key U.S. inflation data.
Global equities retreated and oil prices rose after Iran and the U.S. exchanged new military strikes, heightening geopolitical tensions. The pan-European STOXX 600 index fell 0.6%, while U.S. futures dropped 1% to 1.2% following President Donald Trump’s warning that Iran would “pay the price.” European government bond yields also climbed on the remarks.
MSCI’s Asia-Pacific index excluding Japan declined 2.3% earlier in the session, with the tech-heavy South Korean KOSPI among the laggards. The clashes marked one of the largest flare-ups since a ceasefire in April, though analysts noted risks were now better understood by markets. Investors also awaited U.S. inflation data, which could sway expectations for Federal Reserve rate cuts.
Oil prices edged higher as the conflict raised concerns over potential supply disruptions in the Middle East, particularly near the Strait of Hormuz. Iran’s Revolutionary Guards claimed missile and drone attacks on U.S. bases in Jordan, Kuwait, and Bahrain in retaliation for American strikes.