The unprecedented US airstrikes on Iran have set traders and governments worldwide on edge, as the Islamic Republic warns of retaliation and Israel shows no sign of letting up in its assault. President Donald Trump’s decision to deploy bunker-busting bombs, Washington’s first direct military action against Iran after decades of hostility, has pushed the Middle East into uncharted territory and raised geopolitical risk in a world economy already facing severe uncertainty over his trade war. Oil rose almost 6% when markets opened Monday morning in Asia, with analysts warning $100 a barrel is in sight depending on Iran’s further response to the conflict, which began June 13 with a surprise attack by Israel. The US dollar pushed higher, stock futures fell and Bitcoin slid below $100,000 for the first time since early May. Foreign Minister Abbas Araghchi earlier said the country reserves all options to respond. The Islamic Revolutionary Guard Corps, which answers to the Iran’s supreme leader, signaled US military bases in the region could be targeted. Trump has vowed to meet any retaliation with force “far greater” than the US strikes on the nuclear sites. He also floated the possibility of regime change in Iran, although US and Israeli officials Sunday stressed that isn’t their aim. It’s still unclear how successful the US strikes were in eliminating Iran’s most heavily protected enrichment site at Fordow. The head of the International Atomic Energy Agency, which officially has the task of monitoring Iran’s program, told the UN Security Council on Sunday that no one yet knows the condition of the facility, nor the location of Iran’s more than 400 kilograms of uranium enriched to 60%.
Any move by Tehran to harass traffic through the Strait of Hormuz, a major artery for global crude and natural gas, has raised the specter of a spike in energy prices at a fragile moment for the global economy.
“An expanding conflict adds to the risk of higher oil prices and an upward impulse to inflation,” Bloomberg Economics analysts including Ziad Daoud wrote in a report.