Markets Rattle as War Escalates on Friday the 13th

On Monday, market sentiment began to shift. Oil prices dipped and global stocks rebounded as investors grew more hopeful that the Israel and Iran conflict would remain contained. The initial panic gave way to cautious optimism, with hopes that worst-case scenarios, such as a full-scale regional war, might be avoided.  

This comes after Friday the 13th delivered a jolt to global markets, as a sharp escalation in violence between Israel and Iran rattled investors. Oil prices surged and equities tumbled amid renewed fears of crude supply disruptions and broader economic instability.

While past flare-ups in the region have typically caused only short-lived market turbulence, the scale of this escalation injected deeper uncertainty. According to CBC, Israel launched early morning airstrikes targeting Iranian nuclear facilities, scientists, and senior commanders. In response, Iran fired more than 100 drones, many of which were intercepted. “We once again demonstrated our ability to remove threats in a coordinated, precise and daring manner,” said an Israeli official.

Oil Prices and Inflation Pressures

The initial spike in oil prices reignited concerns about inflation and added fresh pressure on the U.S. Federal Reserve. Although inflation has cooled in recent months, a sustained rise in energy costs could reverse that trend by driving up prices across the economy. “Any remaining hopes for sub-$60 oil this year must now be buried,” said a global research director at a Hong Kong-based investment advisory firm. “Israel’s strikes on Iran mark a clear escalation from previous clashes.”

Winners and Losers as the Conflict Escalated

The Middle East remains a vital region, home to over 67% of the world’s proven oil reserves, according to OPEC. If geopolitical tensions continue to drive oil prices higher, they could derail recent progress on inflation, which eased to 2.4% in May thanks to falling energy prices and limited tariff impact.

Rising oil prices tend to benefit energy producers but pressure most other sectors by fueling inflation and increasing the likelihood of interest rate hikes.

• On Friday, shares of oil majors like ExxonMobil, BP, and ConocoPhillips closed higher, while Sasol jumped 10% on the local market.

• Defence stocks also rallied, with RTX Corporation, Lockheed Martin, and Northrop Grumman climbing on expectations of increased military demand.

• Meanwhile, gold prices rose as investors sought safety, and U.S. Treasury prices slipped, pushing yields higher. This unusual move suggests inflation fears may be outweighing the typical flight to bonds during times of uncertainty.

Geopolitical Risks and Energy Security

Beyond the immediate violence, investors are increasingly focused on potential threats to global energy infrastructure. Analysts warn that Iran could move to disrupt traffic through the Strait of Hormuz, a strategic chokepoint through which nearly a fifth of the world’s oil flows.

Earnings and Opportunity Amid Turmoil

Amid the geopolitical tensions, investors are also paying close attention to earnings reports as a source of direction and confidence. Oracle’s standout performance, with shares surging more than 20%* for the week on the back of strong earnings and robust cloud growth hitting new highs on Friday, underscores how solid financial results could cut through broader volatility.

As markets digest uncertainty, earnings season is proving to be a key driver of sentiment and stock movement. Some investors turn to value strategies like Warren Buffett’s “cigar butt” approach, seeking beaten-down stocks in the market with a bit of life left. These undervalued companies could offer short-term gains and potentially higher dividend yields, making them appealing for income-focused investors when markets are shaky.

* Past performance does not guarantee future results, different types of investments involve varying risk. Take time to do your own research on your investments in order to make informed decisions.

Government bonds offer a reliable way to earn fixed income by lending money to the government in exchange for regular interest payments. 

Dividends are one of the many key components of investing, representing a share of a company's profits distributed to its shareholders. 

Special dividends, also known as extraordinary dividends, are one-time payments made by companies to shareholders due to specific financial events, like windfall profits or asset sales.