Middle East Tensions Spark Global Market Selloff Fears

Investors worldwide are bracing for a significant market selloff as U.S. stock markets prepare to open on Monday morning. The United States' attack on Iran over the weekend has escalated fears of a broader conflict, driving global oil costs higher. Traders anticipate that this sudden development could heavily impact equity markets globally, as concerns over potential retaliation from Tehran and rising energy prices intensify.

The unfolding Middle East crisis is expected to dominate trading this week. U.S. data on business activity, home sales, and inflation are likely to receive less attention as investors focus on the potential fallout from the conflict. President Donald Trump's decision to back Israel’s military action against Iran is a key concern, as it could influence sentiment, drive up inflation, and affect Federal Reserve policy and expectations for rate cuts later this year.

In a televised address, Trump described the strike as “a spectacular military success” and stated that Iran’s nuclear enrichment facilities had been “obliterated.” He warned that the U.S. military could target other sites in Iran if the country did not agree to peaceful terms. Iran quickly responded, reserving “all options” to defend itself. Adding to the tension, Iranian lawmakers approved a measure to close the Strait of Hormuz, a vital chokepoint through which roughly 20% of the world’s oil supply flows.

Analysts are divided on the potential impact of the conflict on global markets. Some believe that the market will react negatively, with the extent of the reaction being the primary question. Others see a chance for the crisis to cool rather than escalate into a prolonged conflict. Mark Malek, chief investment officer of Siebert Financial, expressed optimism, stating that the strike felt like a one-and-done event rather than a long-drawn-out conflict.

Traders will also be monitoring a busy economic calendar of U.S. data releases. Monday brings reports on U.S. business activity and housing sales, Tuesday features the latest consumer confidence figures, and Friday will see the Personal Consumption Expenditures Price Index. Each of these reports could shift the outlook for both stocks and policy. U.S. consumer confidence has dropped recently due to fears of tariffs causing a recession and raising prices. However, with inflation easing and the U.S.-China trade fight paused, investors were hoping for a rebound in sentiment before the weekend.

The Federal Reserve held its key interest rate steady on Wednesday and signaled that borrowing costs are still likely to fall later this year, though at a slower pace than officials anticipated in March. Policymakers cited the potential for higher inflation driven by President Trump’s tariff policies, which have loomed over markets in recent months. The question remains how oil prices and inflation will affect monetary policy and the Fed’s plans for rate cuts.