Investors Brace for Market Fallout From U.S. Strike on Iran Nuclear Sites

Investors on Sunday were bracing for a flight to safety after the U.S. struck three Iranian nuclear facilities Saturday evening. 

“Iran’s key nuclear enrichment facilities have been completely and totally obliterated,” said President Trump in a televised address on Saturday night. A full assessment of the damage is pending, “but initial battle damage assessments indicate that all three sites sustained extremely severe damage and destruction,” said General Dan Caine, chairman of the Joint Chiefs of Staff, on Sunday. 

Investors were relatively sanguine last week as Israel and Iran exchanged missile strikes and President Trump mulled getting the U.S. involved. The major stock indexes jumped to start the week amid optimism about a diplomatic solution, but slid as the conflict dragged on and finished the week little changed. 

Some analysts expect a sharp sell-off when markets open on Monday as investors rush to safe havens like Treasurys and gold. “I think the markets are going to be initially alarmed,” Mark Spindel, chief investment officer at Potomac River Capital, told Reuters.

Cryptocurrencies, which trade 24/7, suggested Monday morning would be a rough one for risk assets. Bitcoin slid more than 2% Sunday morning to trade below $100,000 for the first time since early May, while Ethereum tumbled more than 8%.

A panic on Monday could present investors with a buying opportunity, said Wedbush analysts in a note on Sunday. “This US strike was a matter of when, not if,” they wrote. Iran’s nuclear program was, “the biggest threat to the region,” so if the attack has decimated that program, “this ultimately removes an overhang on the market.” 

American stocks on Monday could follow the lead of Middle East equities, which were rallying on Sunday as investors bet U.S. involvement would hasten an end to the conflict. The Tel Aviv Stock Exchange 35 Index gained 1.5% and the Egyptian EGX 30 rose 2.7%. 

Still, oil prices are expected to jump when crude futures begin trading on U.S. exchanges Sunday evening. How Iran retaliates—if at all—will likely determine how high prices go. Analysts say surging oil prices would aggravate U.S. inflation, possibly delaying Federal Reserve rate cuts and pressuring stock valuations.