European stock markets opened sharply lower on Friday, with investors reacting swiftly to a significant escalation of conflict in the Middle East following Israeli airstrikes on Iran.
The pan-European Stoxx 600 index was down, and oil prices surged as concerns over regional stability and potential supply disruptions took center stage.
About 20 minutes after the opening bell, the pan-European Stoxx 600 was trading 1% lower, a clear indication of the market’s nervousness.
The sell-off was broad-based, with nearly all sectors in negative territory, the notable exception being oil and gas stocks, which benefited from the spike in crude prices.
National bourses across the continent reflected the heightened risk aversion. Germany’s DAX tumbled 1.4% in early trade, while the French CAC 40 was 1.1% lower.
London’s FTSE 100, which had just come off a record high, was down 0.5%.
Futures markets had already signaled a turbulent start, with those tied to the pan-European Stoxx 600 last seen 1.2% lower, and futures linked to the German DAX index down by a more substantial 1.7%.
Even futures for the FTSE 100, despite its recent record, were pointing 0.5% lower.
Israel strikes Iran: details of the attack emerge
The market jitters were a direct consequence of Israeli military action against Iran in the early hours of Friday morning.
Reports indicated that Israel launched a series of airstrikes, and it was later stated that these actions killed the chief of the Iranian Armed Forces as well as two of the country’s leading nuclear scientists.
Israeli Prime Minister Benjamin Netanyahu, in an address, characterized the military action as a “targeted military operation” against Iran’s nuclear and ballistic missile program.
He specified that Israel had hit Iran’s main enrichment site at Natanz, targeted its leading nuclear scientists, and struck at the heart of its ballistic missile program.
This direct and significant military engagement, reportedly conducted without US support, marks a major escalation of tensions in the already volatile region.
Oil soars, safe havens sought as investors flee risk
The immediate and most dramatic market reaction was seen in the oil markets.
Crude oil futures jumped by as much as 13% on Thursday evening following the news of the Israeli airstrikes.
US West Texas Intermediate was last seen up 8.23% at $73.65 per barrel, while global benchmark Brent crude surged 7.96% to $74.88 per barrel.
These sharp increases put both benchmarks on course for their largest single-day gains since 2020.
The scale of the Israeli attack, explicitly aimed at Iran’s nuclear program, took markets by surprise and prompted a swift flight to safe-haven assets.
Investors sought protection in assets traditionally considered stable during periods of heightened volatility.
“The news has led to significant fears about an escalation and a wider regional conflict,” Deutsche Bank strategists noted in a report early Friday.
The effects of the attack have cascaded across global markets, with a strong risk-off move for several asset classes.
The sudden re-emergence of acute geopolitical risk has clearly unsettled investors, who are now reassessing their positions in light of the rapidly evolving situation in the Middle East.
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