Attacks on Iran’s Oil Facilities Spark Panic Across Global Markets.
Trading Leveraged products is Risky
The latest strike on Iran’s oil facilities and energy infrastructure sent oil prices close to $120 per barrel. After the recent spike early this morning, oil rose to the highest level in almost four years. The higher oil prices as well as Friday’s poor employment data are triggering a clear domino effect in the market.
Since Friday’s employment data was released and oil prices became volatile this morning, the stock market has taken the biggest hit. Demand for the US Dollar has increased. Investors are opting to invest in safe-haven assets and are pricing in higher interest rates for 2026.
Middle East Conflict
The conflict between Iran and the US-Israel coalition is intensifying as the war enters its second week. As the conflict enters its second week and the coalition does not seem to be able to achieve its goals without putting troops on the ground, investor confidence is deteriorating.
Missile and drone attacks have hit oil facilities, desalination plants, and infrastructure across the region. The conflict is spreading across several Middle Eastern countries and threatening global energy supply. The main concern for investors is that the Strait of Hormuz remains closed, reducing oil supply by 20% and particularly impacting Asian countries.
HFM - Crude Oil 30-Minute Chart
How will the Seven Leading Economies React?
How will the Seven Leading Economies React?
Poor US Non-Farm Payroll
Jobs fell by 92,000, while economists expected an increase of 58,000. In January, job growth was 126,000, revised down from 130,000. The unemployment rate rose from 4.3% to 4.4%.
The healthcare sector, which usually drives hiring, lost 19,000 jobs. This was mainly due to protests by medical workers. They are demanding changes to staffing policies, higher wages, and better working conditions. Around 31,000 healthcare workers temporarily stopped working during the protests.
Normally, the lower employment data would positively impact the stock market as investors would expect frequent rate cuts. However, as the Federal Reserve is unlikely to cut interest rates, the market was hoping for strong figures to boost confidence. Currently, the poor figures indicate a weakening stock market and a stronger Dollar. Because of this uncertainty, investors are watching comments from Fed officials closely.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said the conflict between the United States and Iran has increased economic uncertainty. Earlier, he expected at least one rate cut this year. Now he prefers a ‘wait-and-see’ approach.
John Williams, president of the Federal Reserve Bank of New York, said the Fed could ease policy if inflation keeps falling toward 2%. He also expects the United States economy to grow about 2.5% this year. Growth should be supported by government spending and strong financial conditions. Investment in artificial intelligence (AI) is also expected to support expansion.
HFM - US Dollar Index 4-Hour Chart
The Outcome of a Long-Term Conflict
Analysts advise that if the conflict continues in the long term, oil prices and the market’s lower risk appetite will negatively impact stocks. Some analysts advise the NASDAQ may even fall to $20,000 in 2026. While the ‘winners’ of the development will remain both the US Dollar and Gold, although investors advise the performance of the Dollar and Gold will also be tied to rate hikes.
Key Takeaways:
* Strikes on Iran’s energy infrastructure pushed oil near $120 per barrel, the highest level in almost four years.
* Global stocks fell sharply, while investors increased demand for the US Dollar and other safe-haven assets.
* The Strait of Hormuz closure is a major concern. About 20% of global oil supply could be disrupted, heavily affecting energy markets.
* Weak US employment data added pressure on markets. Jobs fell by 92,000, unemployment rose to 4.4%, and the data suggests weakening economic momentum.
* Central banks may keep interest rates higher for longer. The Federal Reserve may abandon rate cuts in 2026, while the European Central Bank could raise rates to control inflation.
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Please note that times displayed based on local time zone and are from time of writing this report.
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Michalis Efthymiou
HFMarkets
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