World Urges Restraint Following Iran Attack, Markets Watching

Tensions in the Middle East escalated over the weekend with Iran retaliating for Israel’s alleged attack on its embassy in Syria with a drone/missile attack on Israel using Jordanian and Iraqi airspace. Energy markets are likely to be under upward pressure at the start of the week as the world waits to see if Israel responds. The US has said that it will not support a strike against Iran and is looking for a diplomatic solution with the G7 to prevent escalation.

• Iran has said it has achieved its objective and also doesn’t want an escalation particularly with the US.
• Iran also seized an Israeli ship in the Strait of Hormuz over the weekend using troops from a helicopter. Given Qatar’s location just on the other side of the Strait, these events may also impact natural gas prices.
• IMF managing director Georgieva said that the conflict between Iran and Israel has so far had a “moderate” economic impact. This could change if the situation escalates and results in a sustained rise in oil prices.
• The G7 supported Israel in its defence against the attack, the first from Iranian territory, with the US intercepting four missiles and shooting down over 70 drones. The UK and France were also involved in ensuring most of the weapons didn’t strike. But the US has apparently warned Israel privately not to retaliate but war cabinet minister Gantz has said that it will “exact a price” when the time is right.
• Jordan also shot down several weapons in its airspace and has spoken to Iran in response to its comments that Jordan could be next and to avoid pushing the “whole region into abyss of war” according to foreign minister Safadi.