United States equity futures fell sharply in overnight trade on Sunday (Monday AEDT) after the United States and Israel launched coordinated strikes on Iran over the weekend, sending oil prices surging and injecting fresh geopolitical risk into already fragile markets.
By 10:35 am AEDT (11:35 pm GMT), futures tied to the Dow Jones Industrial Average were down 1%, while S&P 500 futures and Nasdaq 100 futures each declined 0.9%.
The joint U.S.-Israeli operation resulted in the death of Ali Khamenei, marking a watershed moment for the Islamic Republic and one of its most consequential developments since 1979.
President Donald Trump told CNBC that U.S. military operations in Iran were “ahead of schedule”, though investors remain wary of a prolonged and potentially widening conflict.
The large-scale assault followed Iran’s refusal to comply with U.S. demands to curb its nuclear programme. Iranian officials have vowed a forceful response, fuelling concerns that hostilities could spread across the Middle East.
Analysts at ANZ said in a note that “enormous uncertainty prevails” over how the strikes will unfold. They expect an initial risk-off reaction, with traditional safe havens such as the Swiss franc, U.S. Treasuries, the U.S. dollar and gold likely to benefit, while higher-risk assets face renewed pressure.
Crucially, oil markets are reacting to fears over potential disruption to shipping through the Strait of Hormuz, a critical artery for global oil and gas exports.
The Organization of Petroleum Exporting Countries (OPEC+) met on Sunday and agreed to raise its oil production target by 206,000 barrels per day in April as it continues to unwind voluntary output cuts introduced in 2023, a move that may help ease some supply concerns.
U.S. crude prices jumped as much as 8% in early trade, amid fears that the confrontation could escalate into a broader war disrupting supply flows.
Iran is the fourth-largest oil producer within OPEC, and uncertainty persists over the country’s political leadership and stability following the strike.
The trajectory of energy markets may hinge on whether traffic through the Strait of Hormuz is materially affected.
Any sustained disruption at what is widely regarded as the world’s most important chokepoint for crude shipments could reverberate across global energy markets and reignite inflationary pressures.
