inflation outlook: West Asia conflict, oil spike put investors on edge

New York: Israel and Iran launched fresh attacks on each other into Sunday, with Prime Minister Benjamin Netanyahu saying Israeli strikes would intensify as Tehran called off nuclear talks that Washington had held out as the only way to halt the bombing.

Oil prices rose 7% on Friday, as Israel and Iran traded strikes, and investors will be watching closely to see how the price reacts when markets open later.

“So far we are at a stage of ‘controlled confrontation'”, said Lombard Odier’s chief economist Samy Chaar, where it is too soon to call for real and persistent economic damage despite high risk.

On Saturday, Israel appeared to have also hit Iran’s oil and gas industry for the first time, with Iranian state media reporting a blaze at a gas field.

Israel’s air offensive against Iran that began early on Friday, killing commanders and scientists and bombing nuclear sites in a stated bid to stop Tehran building an atomic weapon, knocked risky assets, including stocks, on Friday. It also lifted oil prices and prompted a rush into gold and the dollar, which resumed its role as a safe-haven asset for the first time in months. Oil prices at close to six-month highs could pose a risk to the inflation outlook.