(Bloomberg) -- The key question for markets following Israel’s strike on Iran is how much worse things will get, say strategists.

Most Read from Bloomberg

Shuttered NY College Has Alumni Fighting Over Its Future Trump’s Military Parade Has Washington Bracing for Tanks and Weaponry NYC Renters Brace for Price Hikes After Broker-Fee Ban Do World’s Fairs Still Matter? NY Long Island Rail Service Resumes After Grand Central Fire

Israel has launched airstrikes against Iran’s nuclear program and military targets. Defense Minister Israel Katz called the move “preemptive,” while Israel’s Prime Minister Benjamin Netanyahu said the strikes would last until the threat is removed. The tension weighed on markets: Oil surged, Asian stocks and global equity futures fell, and the dollar reversed earlier losses as traders sought familiar havens.

Here’s what market watchers from Sydney to Paris are saying:

Nicolas Forest, chief investment officer at Candriam in Brussels

“The attack on Iran is a classic risk-off factor that leads to a decline in stocks and a flight to quality. The sharp rise in oil prices, if it continues, could negatively impact growth and inflation, reinforcing the potential risk of stagflation already present with the tariff war. The oil price rally is clearly not in the interest of the Trump administration”

Kim Forrest, a US-based chief investment officer at Bokeh Capital Partners

“It seems like Israel has taken it upon itself to destroy the nuclear bomb building capabilities of Iran and that’s not what we’ve seen in the past. It’s unclear what will happen throughout the night... We’ll see if cooler heads can prevail”

“This is very serious. It’s surprising the market isn’t down more. Do I expect things to get lower in the coming hours? Heck yeah, I expect it to be lower by the time I wake up but it’ll also depend on who’s talking and what’s happening”

Alexandre Baradez, chief market analyst at IG in Paris

“This is likely to put the current rally on European and US indexes on hold. The stock market was getting expensive so this will encourage investors, particularly retail, to take some profits now”

Alexandre Hezez, chief investment officer at Group Richelieu in Paris

“This goes against what central banks were expecting for oil prices and could potentially change their scenario by heating up inflation and slowing growth”

Matt Maley, a US-based chief market strategist at Miller Tabak + Co.

“The comments about doing whatever it takes, Netanyahu saying this is just the beginning and the references to self defense — they are preparing for a serious retaliation. The last time Iran retaliated nothing got through but nobody knows what will happen next”

Story Continues

“My question is what happens with the Strait of Hormuz? Iran can shut that down and that’s 13 million barrels of oil everyday not to mention natural gas and they have the ability to shut that down. Will they want to do that or limit what can go through? I don’t know”

“The assumption that this will be a quick affair is a risky one... If this turns into something lengthy and the Strait of Hormuz gets impacted oil can go above $100 very quickly and that puts pressure on global growth. I don’t want to overstate it because we simply don’t know if things will get worse or not. The real risks are very high right now”

Michael O’Rourke, chief market strategist at JonesTrading in the US

“I’m really just trying to get the best grip I can on the situation and obviously it’s fluid — but there should be more risk involved to the markets than the strikes last year”

“The market has had a tremendous rally without much of a correction so that places the market in a more vulnerable place. It’s one of those situations where we’ve had an escalation and the question is: what does Iran do as a response? Do they have a harder strike back? That’s the looming question in my mind. During the course of this rally markets have been relatively complacent so that’s a key risk with where we are today”

“There’s now a very likely outcome that there’s a retaliatory event over the weekend and that will keep people on the sideline and a little tentative”

Billy Leung, investment strategist in Sydney at Global X ETFs

“It’s a sharp reversal from last night’s bullishness, when tech optimism, soft inflation, and light positioning had the market leaning risk-on — a direct Israeli strike on Iran cuts through that narrative instantly”

“This mirrors past flashpoints like the Soleimani strike in 2020, tanker attacks in 2019, where we saw the same initial reaction: oil bid, Treasuries and Swiss franc stronger”

“The key now is whether this stays contained — history shows markets often fade the shock if escalation is limited”

Wei Liang Chang, a Singapore-based macro strategist at DBS Group Holdings Ltd.

“There could be a knee-jerk reaction in markets, as Middle East geopolitical risks return to to the fore”

“Markets will assess the impact of the strike and watch for risks of an escalation”

“Risky assets could see a pare back, while safe havens such the yen and US Treasuries could be bid”

Matthew Haupt, portfolio manager in Sydney at Wilson Asset Management

“Seeing classical risk off moves with bonds and gold bid, along with a spike in oil. Quite often these moves are faded after the initial shocks. What we are watching now for is the speed and scale of the response from Tehran, that will shape the duration of the current moves”

Charu Chanana, chief investment strategist in Singapore at Saxo Markets

“Whether this risk-off tone sticks now depends on the next 24-48 hours. If Tehran’s response is limited and energy flows remain uninterrupted, experience suggests the premium can bleed out fairly quickly. But any sign of retaliation or supply disruption would keep volatility elevated and push oil and safe-haven assets higher.”

Rodrigo Catril, a Sydney-based strategist at National Australia Bank

“One theme to watch is whether the dollar’s safe haven attributes are being diluted by the US administration’s trade policy (tariffs), fiscal profligacy and its challenge to the rule of law. Evidence to date suggests that is the case”

“Israel’s unilateral move, if confirmed, also highlights how the world order is potentially changing”

“The US is seemingly stepping away from a leading geopolitical role, opening the door for others to pursue their own agenda”

“The concern here would be that Israel is just one and others could follow in the belief that the US won’t be there to stop them”

“Geopolitics is becoming a more disruptive force for markets, adding another layer of uncertainty. Safe havens will go bid but the dollar may not”

--With assistance from Marcus Wong, John Cheng, Bailey Lipschultz, Winnie Hsu and Ruth Carson.

(Adds further analyst comments.)

Most Read from Bloomberg Businessweek

American Mid: Hampton Inn’s Good-Enough Formula for World Domination The Spying Scandal Rocking the World of HR Software New Grads Join Worst Entry-Level Job Market in Years US Tariffs Threaten to Derail Vietnam’s Historic Industrial Boom As Companies Abandon Climate Pledges, Is There a Silver Lining?

©2025 Bloomberg L.P.