The next 24 to 48 hours of conflict will be crucial for markets after the U.S. and Israel launched military strikes against Iran
Amoke rises in Tehran after U.S. and Israel launched a military attack.
The U.S. and Israel attacked Iran, leading Tehran to quickly retaliate with strikes within Israel and elsewhere in the Middle East after President Donald Trump called on Iranians to take over their government.
Those developments have raised questions about whether this conflict will last longer – and risk sweeping up more oil-producing nations – than the 10-day U.S.-Israel military operation in June targeting Tehran’s nuclear facilities.
“This is different,” said Ali Meli, founder and chief investment officer at Monachil Capital Partners, in a Saturday interview with MarketWatch. “There’s a belief that this may be more aimed at regime change, beyond nuclear deterrence.”
‘[T]he question is if there will be a version of regime change like in Venezuela, or something more radical.’Ali Meli, Monachil Capital Partners
“Now, the question is if there will be a version of regime change like in Venezuela, or something more radical,” said Meli.
What happens in the next 24 to 48 hours may provide clues to the potential scope of this conflict and its likely impact on markets, with Iran’s oil infrastructure and the region’s Strait of Hormuz, a critical oil chokepoint, now a major focus. That waterway connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.
Oil (CL.1) (BRN00) prices jumped on Friday as traders began to sense strikes were nearing, as Trump suggested to reporters that the window for diplomacy with Iran could be closing.
“The brief June 2025 conflict is a poor guide to what is likely to follow,” said Nick Redman, analyst at Oxford Analytica, a geopolitical risk-analysis and advisory service owned by MarketWatch publisher Dow Jones. “Then, Iran sought to avoid confrontation because it understood U.S. objectives were limited, meaning that regional relations and wider international legitimacy were worth preserving.”
Now, however, Iran might look to “hunker down or seek to draw out any conflict,” according to Redman.
European leaders from Britain, France and Germany issued a statement Saturday saying their countries had not taken part in the Iran strikes, but they added that they had been in close contact with the U.S., Israel and partners in the region. They called for a resumption of negotiations, the Associated Press reported.
“Clearly, there are more questions than answers in this first day of this,” Ryan Detrick, chief market strategist at the Carson Group, told MarketWatch. “But there are valid concerns that this could become a larger issue than in June.”
Detrick said he’s bracing for near-term weakness in equities, a likely spike in crude oil and for gold and other safe-haven assets to rise. “At the same time, the U.S. economy is still strong, and it’s been a strong earnings season,” he said, adding those factors as being a support for equity prices.
Still, investors have endured a violent rotation under the surface of the stock market in February, with investors looking for cover from artificial intelligence disruptions and cracks in credit.
That could spell a difficult start to March for stocks, plus the “black cloud overhead” from the Iran conflict, Detrick said. “To think we are going to have a calm start to March probably isn’t on anyone’s bingo card.”
Should a longer, more complicated conflict unfold, the U.S. could tap its Strategic Petroleum Reserve in an effort to keep a lid on oil and gasoline prices. U.S. benchmark crude shot up to over $130 a barrel in 2022 after Russia’s full-scale invasion of Ukraine.
However, the U.S could quickly ramp up domestic production given its shale resources, and it also now exerts control over Venezuela’s oil, Meli at Monachil Capital said. That should help keep crude prices in a range, he added.
Gold (GC00) jumped nearly 11% in February, finishing at $5,230.50 an ounce on Friday. That marked gold’s biggest one-month percentage gain since January 2012, and its monthly gain of $516.60 was the biggest one-month net gain on record, according to Dow Jones Market Data.
Cryptocurrencies, which trade 24/7, offered the first glimpse at how investors might react as they wait for Asian markets to open on Sunday. Bitcoin (BTCUSD) was steady, around $66,000, after briefly sinking to a level not seen since early February.
The S&P 500 SPX and Nasdaq Composite COMP and Dow industrials DJIA closed lower Friday, but with the S&P 500 less than 2% off record levels.
The Japanese yen (USDJPY), Swiss franc (USDCHF) and U.S. Treasurys BX:TMUBMUSD10Y BX:TMUBMUSD30Ycould be in the outperformer category. Investors have been increasingly pushing into U.S. government debt recently, a move strategists have attributed to fears over AI threats to employment and economic growth.
Read: The bond market has been doing something strange despite a hot inflation report
Trump, addressing Iranians in a video address, said, “Now is the time to seize control of your destiny.”
Trump last week offered a deadline of 10 to 15 days for a nuclear deal with Iran, which left this weekend as a possibility for a U.S. strike. Iran, with which the U.S. under President Barack Obama had negotiated a nuclear pact that Trump canceled during his first White House term, ranks among the world’s biggest oil producers.
“It has always been the policy of the United States – in particular, my administration – that this terrorist regime can never have a nuclear weapon,” Trump said, in his address, pointing to “an unending campaign of bloodshed and mass murder” against the U.S. over a 47-year span, as well as attacks on Israel.
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