Sharp decline in Wall Street markets and European stocks following the escalation between Iran and Israel.
Global financial markets witnessed a significant decline yesterday, Friday the 13th of June, affected by geopolitical tensions after Iran launched missiles at Israel in response to intense Israeli attacks targeting Iranian nuclear facilities. The escalation led to a widespread sell-off in the markets, with investors shifting towards safe-haven assets.
Wall Street indices closed sharply lower, with the S&P 500 falling by 68.92 points (1.14%) to 5976.34 points, the Nasdaq Composite dropping by 254.13 points (1.29%) to close at 19407.49 points, and the Dow Jones Industrial Average declining by 768.73 points (1.79%) to 42198.89 points, according to preliminary data reported by "Reuters".
European markets were not spared from the downturn, as the Stoxx 600 index closed down by 0.9%, touching its lowest levels in three weeks, marking the fifth consecutive session of losses in the longest declining streak since September 2024. Automotive stocks led the losses by 2.2%, while the travel sector dropped by 2%, influenced by airlines avoiding airspace over Israel, Iran, Iraq, and Jordan.
The military escalation increased demand for safe assets like gold and the dollar, while crude oil prices rose by nearly 6% due to concerns about supply disruptions in the Middle East. The energy sector rose by 0.6%, and shipping companies' stocks such as Maersk (4.2%) and Hapag-Lloyd (1%) surged amid expectations of higher shipping prices due to supply disruptions.
Defense stocks rose, with German Rheinmetall jumping by 2.7% and British BAE Systems by 2.9%. On the other hand, U.S. President Donald Trump commented that Iran "brought the attack on itself" after rejecting the final U.S. warning in nuclear program negotiations, while Washington denied involvement in the attack.
Patrick Armstrong, Chief Investment Officer at Plurimi Wealth, expressed belief that the impact would be short-term, stating: "If this ends quickly, we will see a relatively quick recovery... Our view is that this is likely to be very short-term because Iran is not in a position to respond forcefully given the power dynamics between the two countries."
European economic data showed a decline in inflation, with inflation in Germany dropping to 2.1% in May, affecting the performance of the DAX index, which closed down by 1.1%. Markets remained concerned about trade negotiations between the U.S., China, and the EU, especially with the approaching deadline set by Trump for imposing new tariffs on July 8.
Financial markets seem to remain sensitive to any new developments in the crisis between Iran and Israel, with investors focusing on the possibilities of escalation or containment in the coming days.
