Market participants are bracing for heightened volatility after the United States confirmed it has launched “major combat operations” in Iran.
This is a development that could carry significantly larger consequences than recent geopolitical flare-ups and could quickly reshape views on where to invest in the near term.
President Donald Trump said the US military had begun “major combat operations” in Iran.
According to Reuters, an unidentified Iranian official said several ministries in southern Tehran were targeted.
Recent geopolitical shocks — including a US tariff increase to 15% on all imports and the capture of former Venezuelan President Nicolás Maduro — have been absorbed with relative calm by markets.
However, direct US military action in Iran raises the risk of broader regional disruption and could force a rapid reassessment of where to invest if tensions escalate.
Oil in focus as Strait of Hormuz risk looms
Oil markets are seen as the primary gauge of Middle East tensions and a critical signal for investors weighing where to invest amid escalating geopolitical uncertainty.
Iran sits opposite the oil-rich Arabian Peninsula across the Strait of Hormuz, one of the world’s most critical energy chokepoints.
Around 13 million barrels per day of crude passed through the strait in 2025, representing roughly 31% of global seaborne crude flows, according to Kpler data.
More broadly, about 20% of global oil supply is said to transit the passage.
Brent crude was trading around $73 per barrel on Friday, up roughly 20% this year.
Analysts warn that any disruption to shipments through Hormuz could push prices significantly higher.
During the 12-day conflict in June 2025, Brent climbed toward $80 per barrel before easing as it became clear that flows through the strait were not disrupted.
William Jackson, chief emerging markets economist at Capital Economics, said in a note that even if the conflict is contained, Brent could again rise to around $80.
A prolonged conflict affecting supply could push oil toward $100 per barrel, potentially adding 0.6 to 0.7 percentage points to global inflation, he said.
Reports suggest that some oil majors and leading trading houses have already suspended crude and fuel shipments via the Strait of Hormuz due to the attacks, a move that may further complicate decisions about where to invest across energy-linked assets.
Volatility indicators flash warning
The conflict risks adding to market turbulence in a year already marked by tariff uncertainty and a sharp technology-sector selloff, further clouding investor judgment about where to invest in risk-sensitive assets.
The VIX volatility index has risen by roughly one-third this year, while implied US bond volatility, measured by the MOVE index, is up 15%.
Currency markets are also expected to react. Analysts at Commonwealth Bank of Australia noted that the US dollar index fell about 1% during the June conflict, though the move reversed within days.
“In current circumstances, the size of the fall will depend on how large and how long-lasting the conflict is expected to be,” CBA analysts said previously.
They added that if oil supplies are disrupted for an extended period, the US dollar could strengthen against most currencies except traditional safe havens such as the Japanese yen and Swiss franc, as the US is a net energy exporter.
Israel’s shekel is also expected to move sharply. During previous flare-ups, it fell as much as 5% before rebounding.
Safe havens gain traction
Safe-haven assets have already begun attracting flows, shaping investor debate over where to invest during periods of geopolitical strain.
Gold and silver prices are rising as investors respond to escalating geopolitical tensions between Israel and Iran.
Analysts say fears of a broader conflict, combined with global economic uncertainties and US inflation data, are pushing capital toward precious metals.
Gold is trading near $5,300 and is up 22% so far in 2026, while silver has also rallied strongly.
Some market participants are watching whether gold could test $6,000 and silver $200 if tensions escalate further.
US Treasuries have also seen demand, with yields falling in recent weeks.
By contrast, Bitcoin has not acted as a haven. The cryptocurrency fell 2% on Saturday and has lost more than a quarter of its value over the past two months.
Broader economic implications
Beyond immediate asset-price swings, investors are focused on the inflationary consequences of higher energy costs.
Venezuela, referenced in recent geopolitical developments, currently produces about 800,000 barrels per day of crude, far below its 1990s peak of 3.5 million barrels per day.
Any additional disruption in global energy markets could tighten supply further.
Market participants say the key variable is whether the conflict remains contained or escalates into a prolonged disruption of oil flows and regional stability.
For now, oil remains the principal barometer. If supply routes stay open, markets may stabilise after an initial shock.
If the Strait of Hormuz is compromised, investors warn that equities, currencies, and fixed-income markets could face sustained volatility in the weeks ahead, leaving global investors reassessing where to invest in an increasingly fragile macro environment.
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