Iran’s top joint military command said Tehran would expand its attacks and target the interests of the United States and its allies across the region if the United States attacks Iran’s nuclear facilities, Xinhua news agency reported on Tuesday.
Iranian state television reported that if the United States attacked Iran’s nuclear facilities, it would mean an expansion of the war in the region.
The statement came after U.S. President Donald Trump said the United States would strike the Pick Mountain area “very soon.” US Central Command (CENTCOM) said it launched its eleventh night of attacks on Iran early Wednesday morning. Trump vowed on Tuesday to respond if Houthi fighters in Yemen disrupt the waterway, but did not specify how.
On Tuesday, a handful of tankers appeared to have their journey halted as they approached Yemeni waters heading into the Red Sea. The Iran-backed group sent an email to shipowners warning against calling at Saudi Arabian ports.
Early Wednesday, air defense activities were reported in western, eastern and northeastern parts of Iran. The authorities of East Azerbaijan also reported an American airstrike on a military facility near Tabriz.
Market reaction
At the time of writing, the West Texas Intermediate Index (WTI) is up 2.50% on the day to trade at $84.35.
Frequently asked questions on risk sentiment
In the world of financial jargon, two commonly used terms, “risk enhancement” and “risk mitigation,” refer to the level of risk that investors are willing to endure over a given period of time. In a “risky” market, investors are bullish about the future and are more willing to purchase risky assets. In a “risk-free” market, investors begin to “play it safe” because they are concerned about the future, and therefore buy less risky assets that are more likely to produce a return, even if it is relatively modest.
Typically, during periods of increased risk, equity markets rise, and most commodities – except gold – also boost in value as they benefit from positive growth prospects. The currencies of weighty goods exporting countries are strengthening due to increased demand, and cryptocurrencies are rising. In a risk-free market, bonds rise – especially major government bonds – gold shines, and safe-haven currencies such as the Japanese yen, Swiss franc and US dollar all benefit.
The Australian dollar (AUD), Canadian dollar (CAD), New Zealand dollar (NZD) and smaller currencies such as the ruble (RUB) and South African rand (ZAR) tend to rise in risk-off markets. This is because the economies of these currencies rely heavily on commodity exports for their growth, and commodity prices tend to rise during risky periods. This is because investors anticipate greater demand for raw materials in the future due to increased economic activity.
The main currencies that tend to rise during “risk-free” periods are the US dollar (USD), Japanese yen (JPY), and Swiss franc (CHF). The US dollar because it is the world’s reserve currency and also because in times of crisis, investors buy US government debt, which is seen as secure because the world’s largest economy is unlikely to collapse. Yen, from increased demand for Japanese government bonds because much of them are held by domestic investors who are unlikely to abandon them – even in times of crisis. Swiss franc because strict Swiss banking regulations provide investors with better capital protection.
