The United States conducted airstrikes on three of Iran’s nuclear sites on Saturday, entering Israel’s war against Tehran. The timing was unexpected. On Thursday, U.S. President Donald Trump said he was still considering U.S. involvement and would arrive at a decision “within the next two weeks.”

Financial and political analysts had largely taken that phrase as code word for inaction.

“There is also skepticism that the ‘two-week’ timetable is a too familiar saying used by the President to delay making any major decision,” wrote Jay Woods, chief global strategist at Freedom Capital Markets.

Indeed, Trump has commonly neglected to follow up after giving a “two week” timeframe on major actions, according to NBC News.

And who can forget the TACO trade? It’s an acronym that stands for “Trump Always Chickens Out” — which describes a pattern of the U.S. president threatening heavy tariffs, weighing down markets, but pausing or reducing their severity later on, helping stocks to rebound.

“Trump has to bury the TACO before the TACO buries him … he’s been forced to stand down on many occasion, and that has cost him a lot of credibility,” said David WOO, CEO of David Woo Unbound.

And so Trump followed up on his threat, and ahead of the proposed two-week timeline.

“There will be either peace, or there will be tragedy for Iran far greater than we have witnessed over the last eight days,” Trump said on Saturday evening.

But given Trump’s criticism of U.S. getting involved in wars under other presidents, does America bombing Iran add to his credibility, or erode it further?

The U.S. strikes Iran
U.S. President Donald Trump on Saturday said the United States had attacked Iranian nuclear sites, pushing America into Israel’s war with its longtime rival. Secretary of Defense Pete Hegseth said Sunday that “Iran’s nuclear ambitions have been obliterated,” a sentiment echoed by Trump, who stressed that “Obliteration is an accurate term.” The decision to attack Iran engages the American military in active warfare in the Middle East — something Trump had vowed to avoid.

Iran calls attacks ‘outrageous’
Iran’s Foreign Minister Abbas Araghchi on Sunday said Tehran reserves all options to defend its sovereignty and people after the “outrageous” U.S. attacks on three of its major nuclear enrichment facilities. Iranian state-owned media, meanwhile, reported that Iran’s parliament backed closing the Strait of Hormuz, citing a senior lawmaker. The U.S. on Sunday called on China to prevent Iran from doing so.

Investors assess U.S. attacks
U.S. futures slid Sunday evening stateside as investors reacted to Washington’s strikes on Iran. Futures tied to the S&P 500 lost 0.17%, Dow Jones Industrial Average futures fell 0.24% and Nasdaq 100 futures dropped 0.21%. On Monday, Asia-Pacific markets mostly fell at 1:45 p.m. Singapore time. Japan’s Nikkei 225 slipped 0.15% and South Korea’s Kospi Index retreated 0.3%. However, Hong Kong’s Hang Seng Index bucked the trend to climb 0.29%.

Oil prices pare gains
U.S. crude oil were up 1.1% to $74.65 per barrel, while global benchmark Brent climbed 1.12% to $77.88 per barrel early afternoon Singapore time. The commodity pared gains from earlier in the day, when prices jumped more than 2% in oil’s first trading session after Saturday’s events. That said, multiple analysts raised the prospect of oil hitting $100 per barrel, especially if exports through the Strait of Hormuz are affected.

[PRO] Eyes on inflation reading
Where markets go this week will depend on whether the conflict in the Middle East escalates after the U.S.’ involvement. Investors should also keep an eye on economic data. May’s personal consumption expenditures price index, the Federal Reserve’s preferred gauge of inflation, comes out Friday, and will tell if tariffs are starting to heat up inflation.

Why global markets are brushing off U.S. strikes on Iran

The U.S. joining the war between Israel and Iran might seem like a geopolitical flash point that would send markets tumbling.

Instead, investors are largely shrugging off the escalation, with many strategists believing the conflict to be contained — and even bullish for some risk assets.

“The markets view the attack on Iran as a relief with the nuclear threat now gone for the region,” said Dan Ives, managing director at Wedbush, adding that he sees minimal risks of the Iran-Israel conflict spreading to the rest of the region and consequently more “isolated.”

Furthermore, rhetoric around the idea of shutting down the Hormuz waterway has been recurring from Iran, but it has never been acted upon, with experts highlighting that it is improbable.

The U.S. joining the war between Israel and Iran might seem like a geopolitical flashpoint that would send markets tumbling. Instead, investors are largely shrugging off the escalation, with many strategists believing the conflict to be contained — and even bullish for some risk assets.

As of 1 p.m. Singapore time, the MSCI World index, which tracks over a thousand large and mid-cap companies from 23 developed markets, declined only 0.12%. Safe havens are also trading mixed, with the Japanese yen weakening 0.64% against the dollar, while spot gold prices slipped 0.23% to $3,360 per ounce. The dollar index, which measures the U.S. dollar against a basket of currencies, rose 0.35%. 

In general, the market reactions after the U.S. strikes have been less aggressive, especially relative to just over a week ago when Israel launched airstrikes against Iran.

“The markets view the attack on Iran as a relief with the nuclear threat now gone for the region,” said Dan Ives, managing director at Wedbush, adding that he sees minimal risks of the Iran-Israel conflict spreading to the rest of the region and consequently more “isolated.”

While the gravity of the latest developments should not be dismissed, they are not seen as a systemic risk to global markets, other industry experts echoed.

On Saturday, U.S. President Donald Trump said that the United States had attacked Iranian nuclear sites. Traders are now keeping a close eye on any potential countermeasures from Iran following the U.S. strikes on its nuclear facilities.

Oil markets are entering a new phase of uncertainty after the U.S. entered the war between Iran and Israel, with experts warning of triple-digit prices.

Investors are closely watching for Iran’s reaction following the U.S.’ strikes on its nuclear facilities, with Iran’s foreign minister warning his country reserved “all options” to defend its sovereignty. 

Oil futures were up over 2% as of early Asia hours. U.S. WTI crude rose more than 2% to $75.22 per barrel, while global benchmark Brent was up nearly 2% at $78.53 per barrel.

“There is real risk of the market experiencing unprecedented supply disruptions over coming weeks, of a much more severe nature than the oil price shock in 2022 in wake of the Ukraine war,” said MST Marquee’s senior energy analyst Saul Kavonic.

While the market reaction post U.S. strikes has been less aggressive, relative to just over a week ago when Israel launched airstrikes against Iran, industry watchers believe that the latest developments usher in a new era of volatility for the oil markets, especially as they await for potential Iranian countermeasures.

Threats of blocking Strait of Hormuz, after Iran’s parliament approved closing it as per state media, have added to market jitters.

The strait, which connects the Persian Gulf to the Arabian Sea, is a critical artery for global oil trade with about 20 million barrels of oil and oil products passing through it per day. That makes up almost one-fifth of global oil shipments.

If Iran does close the Strait of Hormuz, Western forces will likely “directly enter the fray” and try to reopen it, Kavonic told CNBC, adding that oil prices could approach $100 per barrel and retest the highs seen in 2022, if the closure goes beyond more than a few weeks.

“Even a degree of harassment of passage through the Strait, short of a full closure, could still see a serious heightening of oil prices,” said the senior energy analyst.

Kavonic’s view is echoed by other industry experts.

The U.S. and allied military would eventually reopen the Strait, but if Iran employed all its military means, the conflict could “last longer than the last two Gulf Wars,” said Bob McNally, president of Rapidan Energy Group. And should Iran decide to attack Gulf energy production or flows, it has the capability to disrupt oil and LNG shipping, resulting in sharp spike in prices. 

“A prolonged closure or destruction of key Gulf energy infrastructure could propel crude prices to above $100,” he said.

The CBOE crude oil volatility index, which measures the market’s expectation of 30-day volatility in crude oil prices, is at March 2022 levels it hit shortly after Russia invaded Ukraine.

While there has been some level of uncertainty with regards to how developments in the Middle East could play out for oil supplies, Lipow Associates’ Andy Lipow noted that the current developments carry a different weight.

“This time feels different, given the barrage of missiles that have been fired for over a week and now the direct involvement of the USA,” he said, adding oil could hit $100 per barrel should exports through the Strait of Hormuz be affected.

While an attempt to block the Hormuz waterway between Iran and Oman could have profound consequences for the wider economy, threats of blocking the strait have mostly been rhetorical, with experts saying that it is physically impossible to do so.

“So the picture is a little bit mixed, and I think traders will err on the side of caution, not panicking unless there is more real evidence to do,” said Vandana Hari, founder and CEO, Vanda Insights.

Iran in 2018 threatened to close the Strait of Hormuz amid heightened tensions after the U.S. exited the nuclear deal and reinstated sanctions. Similar threat were issued in 2011 and 2012, when senior Iranian officials — among them then–Vice President Mohammad-Reza Rahimi — warned of a possible closure if Western nations imposed more sanctions on Iran’s oil exports over its nuclear activities.

Additionally, it is worth noting that Iranian energy infrastructure has not been a target thus far even with the recent conflagrations, said Rebecca Babin, senior energy trader at CIBC Private Wealth.

“It appears that both sides have an incentive to keep oil out of the line of fire, at least for now,” she said.