Israel’s Limited Attack on Iran: Impact on International Oil Prices and Global Equity Markets

In the early morning hours of April 19, 2024, local time, news outlets reported that “Israel launched a retaliatory strike against mainland Iran.” This was just days after Iran had retaliated against Israel with missiles and drones, with reports of lights and explosions over the central Iranian city of Isfahan. Reports followed that airports, including Isfahan International Airport, were closed and flights were being diverted. 

In the absence of an official Israeli response, Iranian officials claimed that “there was no missile attack, three unmanned aerial vehicles were shot down, and the explosion was an air defense system activation.” They also emphasized that “there was no damage in Iran related to this Israeli attack.” Iranian airline flights resumed, and airports that had been closed reopened within hours. 

“Israel used fighter jets to fire missiles in an attack on the Iranian mainland,” ABC reported, citing an unnamed senior U.S. official. “The target was an air defense radar station at Iran’s Natanz nuclear facility, and three missiles were fired.” However, with conflicting claims from both sides and no official Israeli response, it is still unclear what weapons were used in the strike. 

Isfahan is one of the launch sites for Iran’s missiles and drones aimed at the Israeli mainland, notably its nuclear facilities. However, Iran said it would not respond immediately because “there was no damage, including to nuclear facilities, and it is not clear who was responsible for the attack.” This means that the Israeli strike on Iran’s mainland was very 

limited. Furthermore, experts believe that the attack was designed to demonstrate Israel’s ability to strike inside Iran and hit highly sensitive targets, as well as to placate hardline opinion inside the country, issuing a strong warning but avoiding escalation. 

The response from Iran, which on April 18, 2024 local time had warned of a ‘Fifth Middle East war’ in harsh retaliation if Israel attacked, was also different. Iran devalued the Israeli attack, saying “it was harmless” and noted that “it would not respond immediately.” However, Iran’s foreign minister warned that “if Israel attacks further after this strike, we will respond immediately and at the maximum level.” Against this backdrop, experts are cautiously optimistic that “while tensions remain high, the April 19 airstrike is unlikely to lead to an immediate escalation.” 

Nevertheless, the geopolitical risk of retaliatory warfare between Israel and Iran sparked an uptick in the price of crude oil, with prices spiking more than 3% at one point during the session, but gains were capped by the prospect that the conflict between the two countries would not escalate into a Middle East war that would disrupt crude supplies. 

On April 19, 2024 local time, West Texas Intermediate crude for May delivery settled up $0.41, or 0.50%, at $83.14 per barrel on the New York Mercantile Exchange, while Brent crude for June delivery settled up 0.21%, or $87.29 per barrel. However, safe-haven sentiment increased, pushing the U.S. Treasury prices higher, Treasury yields lower, and gold prices higher. 

Conflicts in the Middle East didn’t have much of an impact on Wall Street, where the tech-heavy Nasdaq Composite fell more than 2%, led by a 10% plunge in shares of Nvidia, which has led to the artificial intelligence boom. The S&P500 closed at 4,967.23, down 0.88% from its pre-market level, marking the first time in two months that the index has fallen below 5,000. The Dow Jones, meanwhile, closed at 37,986.4, up 0.56% from its pre-market level. 

To make matters worse, on April 19, 2024, Asian equity markets continued to bear the brunt of the Middle East risks. Japan’s Nikkei 225 closed at 37,068.35, down 1011.35 points (-2.66%) from the previous day. China’s Shanghai Composite Index had seen a strong start to the day as Chinese economic growth exceeded expectations in the morning, but reversed course in the afternoon trading session. It closed at 3065.26, down 8.96 points (-0.29%) from the previous trading day. Among Asian markets, Taiwan’s KMT was the biggest loser on the day. It plunged 3.8% on the day alone. It closed at 19,527.12, down 774.08 points from the previous day. Finally, South Korea’s KOSPI closed at 2591.86, down 42.84 points (-1.63%)from the previous trading day, and the KOSDAQ was also down 1.61%.

By. Wonjun Lee