Israel attacks Iran nuclear sites, upends oil and Middle East markets for now

• "Unilateral" Israel drone & missile attack, without US bunker busters, means Iran underground nuclear sites are intact

• Risks: regional radiation, Iran retaliation (on Israel, Hormuz oil transit, GCC oil infrastructure, US personnel)

• Markets: Brent oil already up 9% and a jolt for MENA (eg Israel and Saudi-GCC equities, Dubai property), oil importers

  
  

After this note was published 1) the IAEA confirmed there was no sign of radiation following the attack, consistent with other reports that electricity infrastructure serving nuclear sites were targeted and destroyed, rather enriched uranium stores, and 2) Iran launched an initial reprisal with (slow moving) drones and cancelled the next round of talks with the US, 3) President Trump warned more severe attacks are likely without a new nuclear deal with his negotiators, 4) GCC leaders criticised the attack, and 5) Israel confirmed that strikes against Iran continue.

Israel's attack on Iran's nuclear assets on 13 June upends crude oil and Middle East regional markets in, at least, the short-term. Oil price (Brent) has jumped another c9%, at the time of writing.

A sustained hike in the geopolitical risk premium in the oil price and the US dollar could also disrupt low income emerging markets with a dependency on net fuel imports or external portfolio capital inflow.

This attack was a shock even though Israel directly attacked Iran as recently as October 2024, the prospects of an attack targeting nuclear assets had been building since at least March 2025, tensions had spiked in the last couple of days (US repatriation of non-essential diplomatic staff in Iraq and military personnel dependents in the region, President Trump's remarks that an Iran nuclear weapon will not be allowed, and the IAEA censure of Iran), the oil price had already bounced off its early May lows, and the regional heavyweight market, Saudi Arabia, was already the worst performer in large emerging equity markets year to date (with the exception of Thailand).