Middle East Conflict Spreads, Oil Prices Surge; Dollar Steady Amid Fed Hesitation
Vexoda Newsroom
The Middle East conflict intensified with US strikes on Iran followed by Iranian counterattacks across five countries. Equity markets fell as risk sentiment weakened, while the dollar held steady amid
A series of rapid and intense military actions in the Middle East dominated Friday's trading session, escalating tensions between the United States and Iran. The US launched strikes on several critical infrastructure sites in Iran, including bridges connecting Bandar Abbas to other regions and a telecommunications tower, while Iran retaliated by targeting US facilities at Bahrain’s Sheikh Isa Air Base with suicide drones.
The conflict quickly spread beyond its original focal point as Bahrain, Kuwait, and Qatar also reported attacks. The rapid escalation underscored the expanding geographic footprint of the dispute. Meanwhile, away from the Gulf, equity markets experienced a significant sell-off, particularly in Japan where the Nikkei dropped nearly 4.5% on Friday.
In monetary policy news, Federal Reserve Vice Chair Philip Jefferson expressed concern over inflation but stopped short of supporting an immediate interest rate hike at this month's meeting. His comments reflected both cautiousness and readiness to respond to data, highlighting potential risks from various global shocks including AI-driven demand fluctuations.
Political tensions also added complexity as President Trump accused China of illegally acquiring 220 million US voter files, though he did not claim Beijing interfered in the 2020 election. This accusation affected currencies sensitive to Sino-US relations, with both Australian and New Zealand dollars weakening on the news.
The dollar maintained its stability against other major currencies despite expectations of reduced Fed rate hikes this year. The euro was little changed near 1.1440, while the yen remained at a historic low around 162.40 per dollar, prompting verbal intervention from Japanese officials but with limited effect.
Analysts noted that potential repatriation flows from Japanese investors could provide support for equities and pressure government bond yields lower in the coming weeks, as Tokyo aims to increase domestic allocations of state pension funds.
Source: InvestingLive. Summarized and rewritten by the Vexoda Newsroom. This is market news, not financial advice.