Investors fearing worst-case Middle East scenarios hunker down

Economic

Summary:

Fears of a full-blown Middle East conflict drive investors to safe havens like the dollar and gold, as oil prices surge, stocks fall, and geopolitical tensions threaten market stability.

Investors' worst-case scenario of a full-blown Middle East conflict is coming into view, unleashing a flood of capital out of risk assets and into classic safe-havens, topped once more by the dollar.

Israel on Friday said it had launched a strike against nuclear facilities and missile factories in Iran and killed a swathe of military commanders in what could be a prolonged operation to prevent Tehran building an atomic weapon.

Oil, which accounts for roughly 30% of global energy demand, soared - gaining almost 14% at one point - along with gold , while government bond yields fell briefly. Shares, near record highs, also declined, led by airlines.

"This is a dangerous situation," said Francois Savary, chief investment officer at Genvil Wealth Management in Geneva. "This is one of those situations where everything is under control and then everything is not under control."

Iran is one of the world's largest exporters of crude. It also borders the Strait of Hormuz, a critical choke-point through which roughly a fifth of daily global consumption flows and which Iran has previously threatened to close in retaliation to Western pressure. U.S. President Donald Trump suggested Iran, which promised a harsh response, had brought the attack on itself by resisting U.S. demands in talks to restrict its nuclear programme, and urged it to make a deal, "with the next already planned attacks being even more brutal".

In markets, focus returned the real-world implications of the flare-up.

Investors and central banks alike have been wrestling with the direction of interest rates from here, given the likely upward hit to consumer prices and growth from U.S. tariffs.

Friday's strikes by Israel added to that dilemma, given the surge to 5-1/2 month highs in the oil price. U.S. Treasuries struggled to gain much of a safe-haven tailwind, leaving 10-year yields holding steady on the day around 4.36% .

DOLLAR BACK

The dollar, which for weeks has borne the brunt of investor risk aversion, again took up the mantle of ultimate safe haven.

"The dollar is reverting to that traditional role of safe haven, which we haven't seen for months," City Index strategist Fiona Cincotta said.

"We've got the equities markets coming lower in the safe-haven, risk-off trade and giving the dollar some much-needed boost from the lows that it was trading at."

The S&P 500 (.SPX)

, opens new tab fell 0.7% in early trade on Friday, but remained near record highs struck in February.

The dollar, which is down 10% against a basket of six others this year, has traded virtually in lockstep with stocks since Trump's April 2 "Liberation Day" unveiling of tariffs and subsequent erratic approach to trade policy that has shattered confidence in U.S. assets.

That relationship began to erode on Friday, as investors embraced the dollar at the expense of stocks, crypto, industrial commodities and currencies such as the safe-haven Swiss franc and yen.

OIL SLICK

Brent crude oil prices were last up 7% at $75.54 per barrel , were set for their biggest one-day jump since 2022, when energy costs spiked after Russia's invasion of Ukraine.

"If we see oil prices moving towards $80 and above then that becomes more of an issue for global central banks," said Chris Scicluna, head of economic research at Daiwa Capital Markets.

Marlborough fixed income fund manager James Athey said there was a risk investors may be too quick to take a lack of ratcheting-up in tensions as a green light to dive back into things like stocks.

"In general, markets tend to look through these sorts of events quite quickly but of course therein lies the risk of complacency," he said.

"The situation is genuinely tense and fraught and risk assets are still priced for perfection," he said.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Adam

Economic

Many technology leaders remain skeptical or concerned about the use of artificial intelligence tools, at the same time organizations are relying on these tools to handle a growing number of roles and functions. Given this paradox, a key consideration is what will it take to bring these two opposing dynamics in alignment?

A recent survey of 1,393 technology leaders across nine countries by IT staffing and services provider Experis showed that about two-thirds are accelerating their AI capabilities and about half are embedding AI skills into existing roles rather than creating new positions.

And yet, despite the ongoing buzz around AI, the research indicated a measured approach to AI adoption among technology leaders. Just 37% see generative AI as a valuable solution for specific applications today, and 33% remain uncertain about its business impact.

“CIOs and technology leaders are embedding AI into existing functions and roles primarily by using it to augment existing work patterns and tasks,” said Cameron Haight, an analyst at research firm Gartner. “This initial use of AI tools is expected to generate modest productivity increases. In the short term, AI operates within boundaries, enhancing current processes without fundamentally transforming them.”

Businesses are using AI in several key areas, said Kye Mitchell, president of Experis U.S. They’re deploying it to accelerate coding and automate testing in software development; to enhance cybersecurity via real-time threat detection and response; and to improve customer support and sales by streamlining ticket handling and personalizing outreach.

Over time, AI tools are expected to push boundaries, becoming more “agentic” and capable of breaking down complex problems, Haight said. “This will transform work patterns by enabling developers to fully automate and offload more tasks,” he said.

AI agents can enhance developer experience and increase the ability to deliver business value, Haight said. “For example, an AI agent can automate tasks such as code generation, debugging, and performance tuning,” he said.

Gartner research has a more nuanced view on AI replacing humans for jobs, however, as the impact is complex and varies, Haight said. “While there is speculation and hype from vendors touting ‘AI-based software engineers’ that could supplant human engineers, we believe that the rumors of the demise of, for example, software engineers are greatly exaggerated,” he added.

The skepticism and uncertainty among IT leaders regarding AI’s business impact is partly because many organizations struggle to translate AI investments into tangible productivity improvements, Haight said.

Achieving alignment

Navigating the balance between the hype, potential, and challenges of AI requires technology leaders to focus on strategic integration, workforce adaptation, and cultural change, Haight said.

Companies need to shift the focus to an AI-first mindset. “Instead of developers manually coding everything, cultivate an ‘AI-first’ mindset where software engineers primarily focus on steering AI agents by providing relevant context and constraints,” Haight said. “This means upskilling teams in prompt engineering and retrieval-augmented generation skills.”

To effectively leverage AI, especially for building AI-empowered applications and supporting new roles such as AI engineers, organizations need to invest in AI developer platforms, Haight said. “These platforms provide the necessary technology, workflows, reusable components, access to large language models, and support for responsible AI practices, enabling efficient and scalable AI integration,” he said.

The impact of AI necessitates redesigning roles to fit new ways of operating and account for changing demand, Haight said. “Instead of just replacing roles, focus on reconfiguring roles often towards assisted multi-skilled generalist roles where AI automates routine tasks,” he said. “Set up more networked and dynamic teaming to make it easier for people to connect with work.”

To align AI enthusiasm with business impact, technology leaders “need to create space for innovation without losing control,” Mitchell said. “That means setting up safe sandboxes to test AI, building bridge roles that connect tech with business, and measuring results through real outcomes — not just hype. Just as important, we need to upskill teams so AI becomes a productivity partner, not a mystery or a threat.”

Also to help close the gap between AI deployments and executive hesitation, technology leaders must focus on small, strategic deployments that show measurable business value, Mitchell said.

“Whether it’s reducing time-to-resolution in customer service or speeding up code review, pilot programs with clear KPIs [key performance indicators] can turn AI from a buzzword into a business tool,” Mitchell said. “But adoption won’t scale without education.”

At the same time, companies need to put strong AI governance in place to monitor how tools are trained, deployed, and evaluated — especially in industries where bias or error carry heavy consequences.

“And perhaps most importantly, leaders need to bring people into the process,” Mitchell said. “Co-creating AI solutions with cross-functional teams builds trust, improves outcomes, and helps shift the narrative from fear to empowerment.”

While some jobs — such as data entry, low-level coding, and routine legal review — are vulnerable to automation, the future is bright for roles that blend human judgment with machine intelligence, Mitchell said. “Think AI engineers, data ethicists, cybersecurity experts, and product leaders who know how to build with AI, not just around it,” she said. “The new era of work belongs to those who can collaborate with the machines, not compete against them.”

Source: cnbc

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Manuel

Middle East Situation

Israel's attack on Iran Friday has catapulted their long-running conflict into what could become a wider, more dangerous regional war and potentially drive prices higher for both businesses and households.

Oil and gold surged and the dollar rose as markets retreated, signaling a flight to investments perceived as more safe.

After years of sky-high inflation in the aftermath of the COVID-19 pandemic, Americans have become increasingly leery about the economy this year due to President Donald Trump's sweeping tariffs, though the impact so far has been muted.

The latest escalation in the Middle East has the potential to cause widespread price increases that could set consumers back again.

Here's a look at some of the sectors that could face an outsized impact from the escalation in the Middle East, and what that might mean for consumers.

Energy

Oil prices surged Friday to their biggest gain since the onset of Russia's war on Ukraine began more than three years ago. If or when Israel's attack on Iran could impact gas prices, which have been in decline for nearly a year, isn't entirely clear.

Iran is one of the world’s major producers of oil, though sanctions by Western countries have limited its sales. If a wider war erupts, it could significantly slow or stop the flow of Iran’s oil to its customers. Energy prices have been held in check this year because production has remained relatively high, and demand for it low. A widening conflict could tilt that balance.

“The loss of this export supply would wipe out the surplus that was expected in the fourth quarter of this year,” analysts for ING wrote in a note to clients.

In the past, conflicts in the Middle East have sent energy price soaring for extended periods but in recent years, because of the huge supply of oil, those spikes have been more fleeting.

Earlier this month, the countries in the OPEC+ alliance decided to increase production again, which often pushes crude prices down. They hit a four-year low in early May. That usually means cheaper gas, of which there is currently a surplus.

According to the auto club organization AAA, the average price for a gallon of gas in the U.S. on Friday was $3.13 per gallon, down from $3.46 a year ago.

Shipping

Shipping costs were already on the rise for a number of reasons. Cargo is being rerouted around the Red Sea where the U.S. began conducting air strikes on Yemen’s Houthis, the Iran-backed rebels who were attacking ships on what is a vital global trade route. And this year, companies have scrambled to import as many goods as possible before Trump’s tariffs kicked in, pushing demand, and prices to ship, higher.

Source: AP

Risk Warnings and Disclaimers

Add to Favorites

Adam

Stocks

Defense stocks climbed early Friday after Israel launched a series of airstrikes on Iran, raising tensions in the Middle East and heightening fears of a broader regional conflict.

Lockheed Martin (LMT) stock gained 3% early Friday, while shares of Northrop Grumman (NOC) and RTX (RTX) rose closer to 2%.

The three companies supply weapons to Israel through their contracts with the US government.

US stocks were lower at the open, with the S&P 500 and Nasdaq off about 0.7% while the Dow fell 1.1%. Overnight futures fell nearly 2% in immediate reaction to Israel's airstrikes, which were first reported near 8:00 p.m. ET on Thursday.

Oil prices were the biggest mover on Friday, rising as much as 8%.

Defense stocks have been on the rise over the past year, with Friday’s gains bringing RTX stock's gain to north of 35% over the past year, while Northrop Grumman is up 19.5%. Lockheed Martin has risen a more modest 3.9% over that time frame.

Palantir (PLTR), a defense contractor that has benefited both from the bid in defense names and its role in the AI boom, traded flat Friday morning. Its stock has soared more than 480% over the last year and is the best performer in the S&P 500 year to date.

RTX has outperformed Wall Street’s expectations since the fourth quarter of 2022. Lockheed Martin and Northrop Grumman have beaten analysts’ projections in seven and six of those nine quarters, respectively.

The Trump administration has promised a $1 trillion budget for US defense, but its fiscal 2026 budget looks set to fall short of that goal.

On Thursday night, Israel launched what it called a "preemptive strike" against Iran, targeting its nuclear facilities. The attacks continued into Friday, killing 78 people in Tehran including Iran’s top military leadership.

Iran’s foreign minister described the attacks as a “declaration of war,” and its supreme leader, Ayatollah Ali Khamenei, said Israel “should expect severe punishment.”

US President Trump urged Iran to “make a deal” in a post on Truth Social Friday.

“There has already been great death and destruction, but there is still time to make this slaughter, with the next already planned attacks being even more brutal, come to an end,” he wrote. “Iran must make a deal, before there is nothing left, and save what was once known as the Iranian Empire. No more death, no more destruction, JUST DO IT, BEFORE IT IS TOO LATE.”

Source: finance.yahoo

Risk Warnings and Disclaimers

Add to Favorites

Damon

Economic

U.S. consumer sentiment improved for the first time in six months in June as trade tensions between the U.S. and China eased, but households worried about the economy's trajectory.

The rise in sentiment reported by the University of Michigan's Surveys of Consumers on Friday was, however, overshadowed by Israel's missile strikes against Iran, which boosted oil prices to multi-month highs and weighed on global stock markets.

Though consumers' inflation expectations also improved this month, higher oil prices are likely to translate into pain at the pump. Gasoline prices have been generally low this year, freeing up much needed money for spending elsewhere.

"The improvement may be short-lived if current geopolitical risks as well as the increase in oil prices continue," said Eugenio Aleman, chief economist at Raymond James. "The same is going to probably be true for inflation expectations."

The University of Michigan's Consumer Sentiment Index jumped to 60.5 this month from a final reading of 52.2 in May.

Economists polled by Reuters had forecast the index would rise to 53.5. The index, however, remained about 20% below last December's level, when sentiment soared in the wake of President Donald Trump's victory in the November 5 election.

Sentiment rose across all age, income, wealth, political party affiliation groups and geographic regions. While the share of consumers giving unsolicited comments about tariffs was down from May, it was higher than any other month since the election.

Stocks on Wall Street fell. The dollar rose against a basket of currencies. U.S. Treasury yields were higher.

UMich current conditions and expectations

DOWNSIDE RISKS REMAIN

The U.S. and China have made big strides towards de-escalating their trade war, with Washington slashing tariffs on Chinese goods to 30% from 145% until mid-August. They agreed earlier this week on a framework covering tariff rates.

"Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed," Joanne Hsu, the director of the University of Michigan's Surveys of Consumers, said in a statement. "However, consumers still perceive wide-ranging downside risks to the economy."

Hsu said consumers' views on business conditions, personal finances, buying conditions for big-ticket items, labor markets and stock markets were all nowhere near the upbeat readings of six months ago.

Some economists were dismissive of the survey, noting that the response rate was very low. Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, called it "a broken compass."

Consumers' 12-month inflation expectations fell to 5.1% from 6.6% in May. Hsu said consumers' fears about the potential inflation surge from import duties have "softened" somewhat.

Their views have probably been influenced by tame consumer price increases over the past three months.

UMich inflation expectations

Economists say consumer inflation has remained benign because businesses are still selling inventory accumulated before Trump's tariffs kicked in. They expect inflation to accelerate from June through the second half of the year. Long-run inflation expectations dipped to 4.1% from 4.2% last month.

"But the fact they (inflation expectations) remain historically high shows anxiety over prices hasn't dropped off consumers' list of worries," said Oren Klachkin, financial market economist at Nationwide.

Federal Reserve officials, who will hold a policy meeting on Tuesday and Wednesday, could take note of the decline in inflation expectations, though the higher readings had previously been dismissed as an outlier.

The U.S. central bank is expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range at the end of its meeting next week while policymakers monitor the economic effects of tariffs.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Adam

Stocks

Dow Drops Over 400 Midday as Israel Strikes Iran; Oil Surges, Tech and Financials Slide

Daily Nasdaq 100 Index

Stocks fell sharply at midday Friday after Israel launched airstrikes on Iran, stoking geopolitical risks and fueling a spike in oil prices. The Dow Jones Industrial Average shed over 400 points, while the S&P 500 and Nasdaq posted smaller declines of 0.3% and 0.4%, respectively. The biggest market movers were energy and defense names, while tech and financials led the downside.

Energy Sector Pops as Crude Jumps 6% on Middle East Conflict

Daily Light Crude Oil Futures

The energy sector was the top gainer by far, up 1.14% midday, as Brent and WTI crude each surged about 6% on fears of supply disruptions from the oil-rich Middle East. WTI nearly touched $74 a barrel.

S&P 500 and Nasdaq: Tech Stocks Drop—Nvidia, Apple Down; Oil Powers Exxon Higher_3

Daily Exxon Mobil Corporation

Major oil stocks like Exxon and Chevron rose over 1%, while Halliburton spiked more than 4%. The energy rally marks a notable pivot from the recent rate-driven pullback and positions the sector as a safe-haven trade in a risk-off environment.

Which Sectors Are Getting Hit the Hardest from the Oil Spike?

Daily American Airlines Group, Inc (AAL)

Travel-related sectors were under pressure. Airlines dropped sharply on expectations of higher jet fuel costs—American and United Airlines each lost 4%, while Delta fell 3%.

Cruise lines and hotel stocks also weakened, as investors priced in softer travel demand. Carnival fell 4%, Royal Caribbean and Norwegian lost about 2%, and hotel chains Marriott and Hilton were down about 1%.

Why Are Tech and Financials Underperforming?

Technology was the worst-performing sector midday, down 0.83%, with the Nasdaq sliding as traders trimmed exposure to growth stocks. Nvidia and other AI leaders sold off following recent gains.

Financials also dropped 1.46%, with rate volatility and risk aversion weighing on banks and credit names.

Consumer staples saw a 0.7% pullback, and real estate and utilities were both down around 0.9% and 0.5%, respectively.

What Are Traders Watching Next for Direction?

With markets on edge, attention remains fixed on further geopolitical developments. Traders are also eyeing energy prices for inflation implications. A sustained rally in crude could reignite broader concerns over Fed policy tightening.

Meanwhile, the University of Michigan consumer sentiment index jumped to 60.5 in June—well above estimates—offering a silver lining. Still, unless tensions de-escalate, the current safe-haven rotation into energy, defense, and gold is likely to persist. Traders will be closely monitoring comments from the Federal Reserve and further oil price action in the coming days.

Source: fxempire

Risk Warnings and Disclaimers

Add to Favorites

Adam

Forex

The dollar’s muted rally against major peers after Israel’s strikes on Iran reinforced the impression that the greenback’s role as a global haven is fading.

A Bloomberg gauge of the US currency gained as much as 0.6% at one point on Friday after Israel’s attacks targeting Iranian nuclear facilities stoked fears of a wider Mideast conflict, but the dollar pared much of the advance by midday in New York. It was last up about 0.1%.

The modest recovery leaves the greenback just above the three-year low it hit this week after President Donald Trump threatened fresh levies against global trading partners. The dollar slid the past five months as Trump pushed ahead with tariffs, which have raised concern over the US economic outlook and fueled speculation foreigners will shun American assets — the so-called Sell America trade.

“Dollar sentiment has taken a real hit,” Sonja Marten, DZ Bank’s head of FX and monetary policy, told Bloomberg Television on Friday. It would take “a complete escalation in the Middle East” to extend the dollar’s gains, she said.

The day’s trading pattern was a far cry from decades past, when international crises would typically fuel gains in the greenback and Treasuries, long considered havens in part because of their liquidity and confidence in the US as a leader in the global economy.

The 10-year US Treasury yield rose about 7 basis points on Friday as surging oil prices stoked inflation worries.

There are some signs that the gloomy stance toward the dollar is easing a bit. For example, options traders — while still broadly bearish on the US currency’s prospects — have moderated their negative views in recent weeks and are banking on a pause in the greenback’s sharp decline.

“The source of shocks to global risk and growth have been more concentrated in the US so far this year,” Goldman Sachs Group Inc. strategists Stuart Jenkins, Kamakshya Trivedi and Teresa Alves said in a report to clients on Friday. “If that source were to shift more to the rest of the world, the dollar may resume trading with more safe-haven type characteristics.”

The US’s position as the world’s largest oil producer likely helped buoy the dollar on Friday as crude futures soared, analysts said. So did the possibility of a squeeze in short positions against the greenback.

The Bloomberg Dollar Spot Index has dropped about 8% this year as Trump’s efforts to overhaul global trade chipped away at investor confidence in the US economy. There are also projections that proposed tax legislation will add trillions of dollars to the federal deficit, while America’s role in security and political alliances is also being called into question.

What Bloomberg Strategists Say...

“It won’t so much be about haven flows, but just about the fact that the US is the world’s largest oil producer. Given that the greenback had only just hit a fresh multi-year low, downside stops got cleaned out and the short-term market will get caught offside by a bounce, which means it may become a self-sustaining climb higher.”

Mark Cudmore, Markets Live strategist

At cross-border payments firm Corpay, Chief Market Strategist Karl Schamotta wrote that the risk-off tone permeating markets reminded investors that the dollar’s losses this year are more a reflection of long-term growth concerns — and less so of any change in short-term demand for the liquidity of US assets.

Before the attack, Wall Street banks were reinforcing their calls that the dollar would weaken further. Paul Tudor Jones, the founder of macro hedge fund Tudor Investment Corp., said the US currency may be 10% lower a year from now as he expects to see short-term interest rates cut “dramatically” in the next year.