US bombing of Iran: Investors prepare for oil rally

A U.S. attack on Iran's nuclear facilities this Saturday could trigger a knee-jerk reaction in global markets when they reopen, sending oil prices higher and triggering a search for safety, investors said, as they assessed how the escalation would spill over into the global economy.

The attack, which was announced by President Donald Trump on the social media platform Truth Social, deepens the United States' involvement in the Middle East conflict , an issue that concerned investors before the weekend.

Immediately after the announcement, they predicted that US involvement would likely trigger a drop in stocks and a potential demand for dollars and other safe-haven assets, but much uncertainty remains about the outcome of the conflict.

While Trump hailed the attack as "successful," few details were known.

"I think markets are going to be alarmed initially, and I think oil will open higher ," said Mark Spindel, chief investment officer at Potomac River Capital.

"We don't have a damage assessment, and that will take some time. Even though you've called this a 'done,' we're committed. What comes next?" Spindel asked.

"I think uncertainty is going to blanket the markets , as Americans around the world are now going to be exposed. Uncertainty and volatility are going to increase, especially with oil," he added.

Spindel, however, said there was time to digest the news before markets opened.

One of the markets' main concerns is likely to focus on the potential impact of events in the Middle East on oil prices and, therefore, inflation, which could undermine consumer confidence and reduce the likelihood of an interest rate cut.

"This adds a new and complicated layer of risk that we'll have to consider and pay attention to," said Jack Ablin, chief investment officer at Cresset Capital. "This is definitely going to have an impact on energy prices and potentially inflation as well."

Before Saturday's US attack, analysts at Oxford Economics modeled three scenarios, including a de-escalation of the conflict, a complete shutdown of Iranian oil production, and a closure of the Strait of Hormuz, "each with increasingly large impacts on global oil prices."

In the worst-case scenario, global oil prices would soar to around $130 a barrel , pushing U.S. inflation to nearly 6% this year, Oxford notes in the note.