Rush for refuge intensifies following Israel’s attack on Iran.

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Investors fled to safe-haven assets on Friday after a series of Israeli airstrikes on Iran marked a significant escalation of conflict in the region. The scale of the attack, which Israel stated aimed at Iran’s nuclear program, surprised markets and pushed prices of protective assets higher amid increased volatility.

“The news has led to substantial fears about an escalation and a broader regional conflict,” Deutsche Bank strategists noted in an early Friday report. “The effects of the attack have cascaded across global markets, resulting in a strong risk-off move for several asset classes.”

Gold reached an almost two-month high following the announcement, although it trimmed some gains as the morning progressed. Spot prices for the metal were up 1.1% at $3,420.24 at 7:42 a.m. London time, while gold futures for August delivery increased by 1.3% to $3,446.

U.S. Treasury prices also rose, consequently lowering yields, with yields on the 30-year, 10-year, and 2-year Treasury notes all down roughly 3 basis points. European stocks are set to open sharply lower, alongside falling U.S. stock futures.

Investors typically seek safe-haven assets during periods of uncertainty to shield their investments from volatility and find stability when risk assets decline. Israeli Prime Minister Benjamin Netanyahu stated that his country had initiated a “targeted military operation” against Iran’s nuclear and ballistic missile program. In response, Iran claimed to have launched approximately 100 drones targeting Israel.

“This operation will continue for as many days as it takes to remove this threat,” Netanyahu asserted. U.S. Secretary of State Marco Rubio remarked that the attack on Israel was “unilateral” and conducted without U.S. backing. “We are not involved in strikes against Iran, and our top priority is protecting American forces in the region,” Rubio stated.

In currency markets, the U.S. dollar, Swiss franc, and Japanese yen—recognized as safe havens—appreciated. After a challenging few months marked by policy uncertainty from the recent administration, the U.S. dollar index, which evaluates the greenback against a basket of major peers, rose by 0.36%. The Swiss franc and Japanese yen both gained against the dollar earlier in the day, although the changes stabilized by 6:50 a.m. London time.

The most dramatic market reaction was observed in oil, as investors expressed concerns over potential Iranian retaliation and disruptions to oil supply. Crude futures surged by as much as 13% following the airstrike, positioning them for their largest single-day gains since 2020.

U.S. West Texas Intermediate was trading 7% higher at 7:48 a.m. London time at $72.76 per barrel, while the global benchmark Brent crude climbed 6.8% to $74.04 per barrel, both slightly down from earlier peaks.

“Looking forward, attention is now shifting to what form Iran’s retaliation might take. It is also uncertain whether negotiations between the U.S. and Iran regarding their nuclear program will continue,” the Deutsche Bank strategists added.

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