“If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to current supply disruptions,” said Warren Patterson, head of commodities strategy .
The Australian dollar lost 0.8 per cent on the news in to buy $US63.7¢ at a five-month low.
Bond markets also rallied after the reported strikes as investors bought government bonds as safe-haven assets and lowered their yields. The declining yield reversed a week-long rise as investors worried about inflation.
‘More fraught by the hour’
Global sharemarkets have been slipping lower for much of the last week as traders nervously awaited Israel’s next move.
Hours before the news of the escalation broke, RBC Capital Markets head of global commodity strategy, Helima Croft, said the Middle East war risked escalation, not de-escalation at present.
“Washington appears to be preparing for an Israeli retaliation, as the ‘take the win and hold your fire’ position has not apparently found many adopters in the Israeli war cabinet,” she said.
“We continue to see a direct threat to regional oil supplies in an expanded war scenario, given that Iran has already threatened to disrupt shipping in the Strait of Hormuz as part of their response strategy, and they seized a vessel in those critical waters hours before “They launched their drone and missile strike on Israel.”
Ms Croft added that in the wider region, the growing conflict in Lebanon between Israel fighters and Hezbollah was also “growing more fraught by the hour.”
