Oil, gold, cryptocurrencies and defence stocks are among a wide range of investments that could be affected by the aftermath of Iran’s “historic” attack on Israel, Mirabaud Group has warned.
Iran launched a major air attack against Israel late on Saturday, after it fired several hundred drones and missiles at the country and the territory it controls. This was the first direct attack of this kind launched from Iranian territory after decades of shadow warfare between the two nations.
There were no fatalities in the attack, which was in response to a recent strike on a building in the Iranian embassy complex in Syria (it is believed to have been carried out by Israel, although the country has a policy of not confirming or denying its involvement in such incidents). However, 12 people were taken to hospital and the Nevatim air base, located in the Negev desert in southern Israel, was reportedly slightly damaged.
John Plassard, a senior investment specialist at Mirabaud Group, said: “Tensions have soared in the region following six months of brutal warfare between Israel and Hamas, the Palestinian militant group backed (unofficially) by Iran, triggered by the latter’s attacks on 7 October last year. Rear admiral Daniel Hagari of the Israel Defence Forces (IDF) described Saturday's barrage as a ‘major escalation’.
“Iran, a long-standing enemy of Israel, has always used proxies to carry out its interventions, hence the interest in groups allied to it in the Middle East. This time the situation is different, because it's historic.”
In light of this, Plassard highlighted several areas of the market that investors should pay close attention to in the wake of the attack, starting with the oil price.
Iran's control over the Strait of Hormuz, a crucial route for oil transportation, places it in a strategic position that can influence global oil supplies. This control became evident as oil prices surged on Friday due to rumours of potential military actions, although they later subsided slightly. Despite this, the general trend for oil prices is expected to continue rising.
Other commodities might also fluctuate depending on their regional ties and the evolving geopolitical situation. Continued tensions could lead to increased volatility in these markets.
Gold, often seen as a stable investment during times of uncertainty, has responded to the recent tension in the Middle East. The yellow metal hit a new all-time high last Friday and could rise further if the conflict intensifies.
Meanwhile, the cryptocurrency market reacted negatively to Iran's recent attack on Israel. Bitcoin, for example, dropped from around $67,000 to $61,625, erasing over $130m in market capitalisation shortly after the event, underscoring the volatile nature of cryptocurrencies during geopolitical crises.
In the defence and aerospace sectors, stocks may gain as investor interest grows, fuelled by Israel's effective defence measures against the Iranian attack. Confidence in Israel’s military capabilities could enhance the appeal of stocks related to defence technologies.
Currency values are sensitive to international conflicts, potentially affecting the exchange rates of those directly involved in or connected to the region. Typically, safe-haven currencies such as the Swiss franc and the US dollar would experience gains in such scenarios.
Stock markets in the Middle East are particularly susceptible to shifts in geopolitical dynamics, which could lead to increased volatility. Conversely, markets perceived as more defensive, such as Switzerland, might benefit from investors seeking safer assets.
Market volatility, which has been relatively “dead” since November 2023, showed signs of resurgence following the weekend's events. The VIX, known as ‘the fear index’, exceeded 17 for the first time since the previous October, indicating market volatility could escalate if the conflict continues.
Finally, Plassard said investors might demand a higher risk premium for all assets in the region on the back of this geopolitical uncertainty and tensions. “In short, in the event of Iran's involvement (or continued involvement), many assets could be affected,” he argued.