US airstrikes on Iran: a new geopolitical shockwave

Announcing the attacks on 21 June, US President Donald Trump described the operation as a “spectacular military success.” Iran has already retaliated by launching missiles at Israel. Meanwhile, China and Russia have called for an immediate ceasefire, warning that deeper US involvement could severely undermine regional stability and global peace prospects.

This sudden intensification of conflict introduces a new layer of geopolitical risk with wide-ranging implications for global markets.

Oil prices surged to a five-month high in the wake of the attack, with Brent crude, the international oil benchmark, climbing above USD 80 a barrel. The US dollar gained as investors sought safety from the world’s reserve currency.

Brent crude was already up 18% since early June ahead of the US strikes. The magnitude of its latest move higher will depend heavily on Iran’s response – particularly any disruption to the Strait of Hormuz – and the extent of further US military involvement. The key for global economies and inflation will be if the increased oil price is temporary or more permanent.

In the short term, we anticipate oil prices could linger in the USD 80–100 per barrel range. However, some geopolitical risk is already priced in, especially at the front end of the curve. Major producers like OPEC+, and notably Saudi Arabia, are positioned to offset supply disruptions, but most of their oil exports also pass through the Strait of Hormuz. Additionally, coordinated releases from strategic reserves could help stabilise markets. European Union countries hold the equivalent of around 90 days of average net imports. The US holds around 20 days of oil demand, but the country is largely energy independent. China lacks official data on stockpiles, but estimates put their reserves at around 30 days of net imports.

A sustained higher oil price would strain global supply chains and reignite inflationary pressures, particularly in energy-dependent economies. China, which sources roughly one-third of its oil from the Middle East, is especially vulnerable. Europe also faces exposure, though less than China. In recent years, the US has produced more energy than it consumes, making it relatively insulated from the impact of prolonged higher oil prices. But overall, a sustained period of high oil prices would add another potential headwind to global growth, compounding the effects of ongoing trade tensions and tariff negotiations.

• Equities: US and global equity markets are likely to fall initially as investors reassess risk. Defensive sectors may outperform, while cyclicals could come under pressure. Nevertheless, historically, markets tend to rebound after an initial shock – provided the conflict does not broaden. A swift de-escalation could even trigger a relief rally, like after the US invaded Iraq in 2003. US retail investor sentiment, which has been instrumental in the surprisingly strong post “liberation day” market recovery, will be a key factor to monitor.
• US Treasuries: A classic flight to safety is expected, with yields on long-dated Treasuries likely to decline. It remains to be seen whether Treasuries reclaim their traditional safe-haven status or continue to show relative weakness compared to alternatives like German Bunds.
• US dollar: Prolonged conflict and inflationary pressures could complicate the US Federal Reserve’s (Fed) policy stance even as the dollar initially strengthens after the attack. Over the medium term, structural concerns – such as the US twin deficits and weakening safe-haven credibility – may weigh on the currency.
• Other safe havens: Gold and the Swiss franc are poised to benefit. Gold, in particular, could extend its bull run as geopolitical uncertainty boosts demand for the yellow metal. Central banks, already increasing their gold holdings, may accelerate this trend – reinforcing gold’s role as a strategic reserve asset, second only to the US dollar in terms of central bank holdings.