Key Points
- President Trump pushed back a decision on U.S. military involvement in the Israel-Iran war for two weeks.
- The delay sparked a relief rally, with stock markets in Europe and Asia experiencing a rise.
- Oil prices fell sharply on the news as fears of an immediate escalation eased. Other safe-haven assets, like gold and the U.S. dollar, also declined.
- Despite the market relief, Israel and Iran continued to exchange fire, and the risk of a wider conflict remains.
Stock markets got a boost on Friday, and oil prices took a tumble after President Donald Trump announced he would delay a decision on whether to join the military conflict between Israel and Iran. The news gave nervous investors a sense of relief after a tense week dominated by war fears.
The war itself is still raging, with Israel bombing targets in Iran and Iran firing back with missiles overnight. However, the big news for the markets was the White House statement that Trump would decide within the next two weeks, not immediately. This signal that the U.S. wasn’t immediately jumping into the fight caused oil prices to drop sharply, in one of their biggest daily falls since April.
The sense of relief spread across global markets. Major stock indexes in Europe rose, following similar gains in Asia. In South Korea, stocks reached a two-year high due to the new president’s stimulus plans, while in Japan, new inflation data put pressure on its central bank.
Other safe-haven assets also fell, with both the U.S. dollar and gold prices easing. Despite the day’s relief, analysts warned that the situation remains dangerous.
The nightmare scenario for the global economy is that the conflict escalates. It disrupts the flow of millions of barrels of oil from the region, even if only temporarily.
