Why does Wall Street go down when Iran attacks Israel?

Geopolitical tension around the world, such as the one that occurred tonight when Iran fired over 150 missiles at Israel, sends investors in the world arena to withdraw funds from the stock markets, and invest in “safe assets” such as the dollar and gold.

In the early evening, a report was published about a possible attack by Iran on Israel. Immediately afterwards, the trend and volatility worsened in the American stock market, which even earlier opened trading with declines. With the start of the attack itself, the leading indices on Wall Street fell by up to 2%, and the “fear index” – VIX – rose by over 20%, which indicates the extreme volatility. Now the index has moderated a little and is up by only 17%.

The biggest fear among investors is a security escalation that will shake, among other things, the global oil market. The price of black gold jumped earlier by up to 5%. Thus, energy stocks also rose sharply, contrary to the general trend on Wall Street.

Looking for safe properties

Reactions such as those seen in the markets today highlight the immediate impact of geopolitical events on global markets and the tendency of investors to seek safer assets in times of uncertainty.

The spdr fund that tracks gold is up more than 1%. The US dollar strengthened against most major currencies. The DXY index, which reflects the strength of the dollar against the leading currencies, is now up by half a percent.

After the attack, in which no casualties were reported, the panic seems to have cooled down a bit. The declines in the leading indices are to a certain extent determined. The S&P 500 index falls by 0.6%, the Nasdaq index weakens by 1.1% and the Dow Jones index trades close to the base levels. The increase in the price of oil also moderated, and now stands at a little more than 2.5% and trades at the level of $73.7 per barrel of Brent.