Overview
Global financial markets opened under significant pressure as traders reacted to large-scale air strikes carried out by the United States and Israel against targets in Iran. The military actions and subsequent tit-for-tat developments around the Middle East sent investors toward traditional safe havens, pushed oil prices sharply higher and prompted steep declines in futures tied to major U.S. equity indices. At the same time, Asian stock markets retreated amid a mix of geopolitical concern and lingering uncertainty over the effects of artificial intelligence on technology earnings.
1. U.S. futures slump
As markets digested the news of the attacks, U.S. stock futures moved notably lower. By 02:54 ET (07:54 GMT), the Dow futures contract had fallen 733 points, a decline of 1.5%. S&P 500 futures were down 104 points, also a 1.5% drop, while Nasdaq 100 futures had sunk 463 points, or 1.9%.
The strikes, announced on Saturday, targeted multiple sites inside Iran and reportedly resulted in the deaths of several high-ranking Iranian figures, including Supreme Leader Ayatollah Ali Khamenei. U.S. political rhetoric around the operation has been forceful; President Donald Trump has called for domestic opposition to remove Iran's long-established government system, though several senior U.S. officials reportedly remain doubtful that a full regime change is imminent, according to Reuters reporting cited in accounts of the events.
Questions have also surfaced over the expected duration of U.S. involvement. President Trump told the New York Times that the campaign could continue for "four to five weeks," while declining to disclose the specifics of how a transition in Iran might unfold. When asked about his preferred approach, he said he had "three very good choices" but "won't be revealing them now," the New York Times reported.
Militarily, the actions have prompted retaliatory measures from Iran at locations across the Middle East, including attacks that have affected energy-producing Gulf states. Media accounts citing U.S. Central Command reported that three U.S. servicemembers were killed and five were seriously wounded. President Trump has cautioned that further American casualties are possible.
Additional signs that the conflict is spreading beyond Iran include Israeli strikes on Hezbollah-linked targets inside Lebanon and reports from the Wall Street Journal that at least one American aircraft has been downed in Kuwait.
2. Oil spikes on Strait of Hormuz concerns
Energy markets reacted violently to the prospect that Iran might disrupt shipping through the Strait of Hormuz, a strategic chokepoint through which about one-fifth of global oil flows and roughly 20% of worldwide liquefied natural gas transit.
At 03:24 ET, Brent crude futures had jumped 10% to $80.14 a barrel, while U.S. West Texas Intermediate futures rose 9.3% to $73.26 per barrel. Reuters reporting noted that, although Iran had not formally closed the Strait of Hormuz at that time, tanker-tracking data indicated vessels were congregating on either side of the waterway out of fears of attack or because they lacked access to insurance for the passage.
The broader economic implication of a marked and sustained rise in crude prices is significant: higher energy costs could feed into consumer prices and add upward pressure to inflation, posing a headwind to consumer demand that is already price-sensitive. If the hostilities persist, additional upward pressure on gasoline, electricity and other energy-dependent goods and services could follow.
Analysts at ING emphasized the uncertainty around the duration of price spikes, noting that the persistence of attacks will largely determine how long elevated oil prices remain in place. ING added that early indications suggested the current military action might not be brief in duration, unlike previous U.S.-Israeli strikes on Iranian targets the prior year.
At the same time, some market participants quoted by the New York Times pointed out that even with the near-term spike, oil prices remained within historically observed ranges. A longer-term supply overhang was cited as a mitigating factor, an effect that could be reinforced by the OPEC+ group's announced plan to modestly increase output next month.
3. Gold benefits from safe-haven demand
Gold gained as investors sought refuge from market risk. By 03:44 ET, spot gold had risen 2.3% to $5,402.31 an ounce, while U.S. gold futures climbed 3.3% to $5,418.09.
ING analysts noted that either a regional spillover of hostilities or a disruption to energy supplies would likely lift gold prices further through the combination of higher oil, increased inflation expectations and constrained real yields.
Beyond the immediate geopolitical drivers, market participants were preparing for an active U.S. data and earnings schedule in the coming days. Notable events on the calendar included the February U.S. jobs report and earnings releases from companies such as Broadcom and Target expected during the first week of March.
4. Asian equities fall on geopolitical and AI concerns
Asian markets opened lower, following a weak tone from U.S. markets and amid a streak of uncertainty around artificial intelligence and its implications for technology-sector profitability. Hong Kong's Hang Seng index and Japan's Nikkei 225 were among the larger decliners in the region, down 2.1% and 1.4%, respectively.
Investors continued to weigh both geopolitical risk and sector-specific questions. Technology shares, particularly software companies, had already been under pressure in February as concerns grew about heightened competition from AI tools and the potential erosion of existing revenue streams.
5. Berkshire Hathaway posts weaker fourth-quarter operating profit
In corporate news, Berkshire Hathaway reported a near 30% decline in fourth-quarter operating profit compared with the same period a year earlier, driven in part by weakness in insurance underwriting results.
Operating earnings from insurance underwriting fell by more than half to $1.56 billion from the prior-year quarter. Insurance-investment income decreased by nearly 25% to $3.07 billion. The conglomerate also recorded $4.5 billion in impairment charges related to holdings in Kraft Heinz and Occidental Petroleum Corporation.
Total operating earnings for the quarter ended December 31 came in at $10.2 billion, down from nearly $14.53 billion a year earlier. The results included the first shareholder letter from Greg Abel, who succeeds Warren Buffett as CEO. In that letter, Abel acknowledged Buffett's stature and described him as "obviously a hard act to follow."
Context and market implications
The immediate market reaction - large equity futures declines, sharp increases in oil and a renewed bid for gold - reflects investors' rapid repricing of geopolitical risk and its potential economic effects. Energy and inflation-sensitive sectors face direct exposure to higher crude prices, which can compress consumer spending power and raise input costs. Financial markets must also factor in the possibility of increased volatility and interruptions to trade flows if the conflict expands or endures.
However, some structural elements in energy markets - including a longer-term supply surplus and scheduled modest output increases from OPEC+ - could temper the persistence of price moves, at least relative to past shocks. How all of these forces play out will hinge on the course and duration of the military actions, clarity on the extent of damage to regional infrastructure and shipping, and responses from other state and non-state actors in the region.
What to watch next
- Developments in the Middle East that could further affect shipping through the Strait of Hormuz and regional energy supplies.
- Data flow and corporate earnings in the coming days, including the U.S. February jobs report and quarterly results from major firms such as Broadcom and Target, which could influence market sentiment amid heightened geopolitical risk.
- Further details on U.S. military engagement and casualty reports, plus any broader regional escalations that might alter risk pricing across assets.
For market participants, the current backdrop underscores the interplay between geopolitics, commodity markets and investor risk appetite. Oil and energy-intensive sectors are most directly exposed, while consumer-facing industries may feel the secondary effects of higher inflation and tighter household budgets if energy costs remain elevated.