Israel–Iran Tensions Jolt Markets: Oil Soars, VIX Up 14%

- Oil Prices Surge, Brent Crude Exceeds $94 per Barrel - U.S. Stock Futures Drop, S&P 500 and Nasdaq Down 1.5% [Unblock Media] Oil prices spiked and U.S. stock futures declined on Friday following reports of Israel launching a military strike on Iranian facilities. This heightened tensions in the Middle East and caused global markets to react. In early Asian trading, Brent crude briefly surpassed $94 per barrel, a more than 6~8% increase from the previous day. West Texas Intermediate (WTI) crude also surged. Geopolitical shocks drove investors away from risky assets, causing S&P 500 and Nasdaq futures to drop more than 1.5~1.8% in pre-market trading. The economic repercussions are spreading. Concerns about supply disruptions through one of the world's most crucial energy corridors have driven oil prices up. Previous conflicts, such as the Russia-Ukraine war in 2022, illustrated how quickly oil-dependent economies can be affected. For instance, Saudi Arabia tripled its current account surplus in 2022 due to increased oil exports, while India faced challenges such as an expanding trade deficit and currency depreciation. Julian Fisher, an energy economist at the Oxford Institute for Energy Studies, stated, "Oil-exporting nations will see higher revenues, but import-dependent economies in Asia and Europe may face cost pressures, triggering inflation and straining trade balances." The sell-off in the stock market reflects cautious investor sentiment. Helen Zhang, a portfolio strategist at Nomura, commented, "The market is factoring in the possibility of broader regional conflicts, which could impact not only energy flows but also global supply chains." Rising oil prices often lead to increased production and transportation costs, driving up consumer prices overall. Central banks, already managing inflation, may face renewed pressure to tighten monetary policy. During the last major oil shock in 2022, the U.S. Federal Reserve raised interest rates four times to stabilize inflation, and both the European Union (EU) and the International Energy Agency (IEA) released emergency oil reserves to stabilize prices. International regulators and central banks are expected to respond swiftly if the situation worsens. Dr. Lina Eberhardt, a former policy advisor at the IEA, stated, "Tools such as strategic oil reserves, renewable energy subsidies, and monetary tightening could be re-implemented by regulators." Energy policy experts also warn that prolonged regional instability could accelerate government efforts to diversify and reduce dependency on oil. While the full scope of Israel's operation and Iran's potential response remains uncertain, markets are already preparing for sustained volatility. The VIX, known as the 'fear index,' rose 14% on Friday morning, indicating increased demand for safe-haven assets like U.S. Treasuries and gold. As geopolitical risks escalate, investors and policymakers are expected to closely monitor further developments in the Middle East and adjust their positions accordingly.