US Markets slide as Middle East tensions spark flight to safety

US stocks closed lower on Friday, with the S&P 500 and Nasdaq both falling 0.70%, while the Dow Jones shed nearly 500 points. The sell-off reflected a flight to safe-haven assets triggered by rising tensions in the Middle East. Israel launched a pre-emptive strike on Iran, targeting nuclear facilities and vowing to continue operations until the perceived threat is eliminated.

The ripple effects were felt in South Africa, where the rand, equities, and government bonds retreated, breaking a multi-week winning streak. Analysts attributed the pullback to heightened risk aversion following Israel’s military action. Recent gains in local assets had been underpinned by progress in coalition budget negotiations, speculation over a lower inflation target, and firm precious metal prices. However, by 15h00 GMT on Friday, the rand had weakened 0.70% to 17.8850 against the US dollar. The JSE’s Top-40 index fell 1.40%, while the yield on the benchmark 2035 government bond climbed 7 basis points to 10.155%.

In the UK, the FTSE 100 dropped 0.60% to around 8 830 in early trading, pulling back from Thursday’s record close. The broader market decline mirrored global sentiment, as escalating hostilities in the Middle East, marked by Israel’s widescale strikes on Iranian targets, sparked fears of a wider regional conflict. Uncertainty over global trade policy further dampened investor confidence.

European markets also came under pressure. Major indices closed in negative territory, with the STOXX 50 down 1.40% and the STOXX 600 slipping 1%. The sharp declines followed Israel’s wave of airstrikes on Iran, which targeted nuclear infrastructure and military facilities, reportedly killing two senior Iranian commanders. Israel warned of continued military action, while Iran has pledged retaliation and launched drones towards Israeli territory, stoking fears of further escalation.

In Asia, market sentiment was similarly affected. Japan’s Nikkei 225 fell 0.89% to 37 834, and the broader Topix Index lost 0.95% to 2 756, marking the second straight session of losses as investors reacted to the worsening geopolitical situation. In China, the Shanghai Composite declined 0.75% to 3 377, and the Shenzhen Component shed 1.10% to 10 122, extending losses from the previous day as global uncertainty deepened.

Commodity markets reflected the rush to safety. WTI crude oil futures briefly surged above $77 before settling around $73 per barrel—its highest level since February—on fears of supply disruptions following the Israeli strikes. Gold prices climbed over 1% to above $3 420, edging closer to record highs as investors sought refuge amid escalating geopolitical risks and ongoing economic uncertainty.