Oil Prices Surge as Israel Prepares Possible Iran Strike

Crude oil prices climbed sharply on Wednesday following indications that Israel might be preparing to launch an attack on Iran’s nuclear infrastructure. U.S. intelligence assessments reportedly pointed to a possible military move, heightening fears of a broader regional conflict in the Middle East and injecting fresh volatility into global energy markets.

The jump in crude prices was accompanied by a rally in safe haven assets, with gold advancing by nearly two percent. However, the geopolitical developments had only a limited impact on Asian stock markets, where most indexes extended gains from the previous session. Hong Kong, Shanghai, Seoul, and Sydney posted advances, while Tokyo and Bangkok lagged behind.

The report detailing U.S. concerns over Israel’s intentions came as tensions in the region remain elevated. Israel has been conducting regular military operations in Gaza, and a strike on Iranian nuclear facilities could escalate the situation dramatically. Analysts have warned that any military action targeting Iran’s nuclear capabilities would carry significant consequences, possibly drawing in other regional actors and impacting global energy supply routes.

Geopolitical Risks and Economic Outlook Drive Markets

U.S. President Donald Trump made statements last week suggesting progress in discussions regarding Iran’s nuclear program. He initially signaled that a deal might be nearing, only to follow up with a more cautionary tone, warning Tehran to act swiftly or face consequences. On Tuesday, Iran’s Supreme Leader Ayatollah Ali Khamenei dismissed the likelihood of progress in talks, citing the lack of results from recent indirect negotiations brokered by Oman since mid-April.

Concerns about stalled diplomacy and Israel’s potential military response have kept a risk premium attached to oil. Market analysts noted that as long as nuclear discussions between Washington and Tehran fail to gain traction, oil prices are likely to remain elevated. Since the beginning of the month, crude benchmarks have risen by around 15 percent, supported in part by improving sentiment on global trade and reduced fears of a global economic downturn.

Stock markets in Asia broadly benefited from easing trade concerns, particularly after the United States and China temporarily reduced tariffs in a bid to de-escalate tensions. However, not all markets shared in the optimism. London equities fell following higher-than-expected inflation data in April, which also pushed the British pound higher against the dollar. Meanwhile, Paris and Frankfurt indexes retreated, reflecting broader uncertainty in European markets.

Currency movements further reflected investor caution. The U.S. dollar weakened against both the euro and the yen ahead of a gathering of G7 finance ministers, amid speculation that Washington may tolerate a softer dollar to support American exporters. The shift came as policymakers continued to weigh the broader effects of trade disputes and monetary policy decisions on the global economy.

China-U.S. Trade Relations and Federal Reserve Concerns

Amid ongoing geopolitical uncertainty, relations between China and the United States came under renewed strain on Wednesday. Beijing issued a strong response to recent U.S. restrictions on semiconductor exports, describing them as coercive. Chinese authorities warned they would retaliate against efforts to limit their access to advanced technology and international supply chains.

The tension followed new guidance from U.S. regulators cautioning companies against incorporating certain Chinese-made artificial intelligence chips, particularly those from Huawei’s Ascend line, due to potential violations of export control rules. The announcement represented a reversal in tone from just a week earlier, when both countries had agreed to reduce tariffs temporarily to ease trade friction.

Iran Strike