The stock markets were off to a slow start for the week - slightly bullish for Wall Street and slightly bearish for Europe - but a major Israeli raid on Iran changed the game last night. It was around 1 a.m. London time when the first reports of a large-scale Israeli offensive began to emerge. The Jewish state struck several sites linked to Tehran's nuclear programme, while eliminating five major figures, two scientists and three of the country's most senior military officials. The air strike was reportedly followed by targeted operations carried out by infiltrated teams.

On the markets, oil prices skyrocketed. Brent crude rose by up to 11%, the sharpest rise in three years. At around 7 a.m., a barrel was trading at USD 75.57, up 7.5% (I would like to take this opportunity to admit my mistake: yesterday, I mentioned USD 80 instead of USD 70 in this column, probably due to the effects of the previous evening's spritz). The pattern of ‘tensions in the Middle East = rising oil prices’ is probably the best-known geopolitical and financial mechanism. Supply may be affected not only by the decline in Iranian production, but also by unrest in the Persian Gulf: one-third of the world's oil tankers pass through the Strait of Hormuz. We must also keep an eye on gas, since Qatar (20% of global LNG) exports only via Hormuz.

The United States has stated that it is not involved in the operation, but that it was kept informed by Israel of its launch. The White House still hopes to reach an agreement with Iran during negotiations set to resume on Sunday in Oman.

Tehran has promised to respond. A first wave of drones has reportedly been launched on Israel. However, there is an asymmetry between the military capabilities of the two countries. In recent clashes, Iran's responses have rarely matched the damage caused by Tel Aviv.

The Middle East has nonetheless entered a new phase, and Israel has made it clear that the operation is only just beginning. In the very short term, the usual mechanisms of tension have kicked in. Oil, of course, but also the strengthening of the dollar (which is starting from a low base) and the Swiss franc. Logically, gold is also returning to test its recent record high.

The relationship between Washington and Tel Aviv is also under scrutiny. The sometimes contradictory statements made the day before by American and Israeli representatives do not help to gauge the temperature of the relationship between the two allies. One thing is certain: the rise in oil prices and the new conflagration in the region are disrupting the Trump administration's agenda and are likely to complicate its economic plans.

For the more anxious among us, there is plenty of literature on investing when this type of event occurs. But I cannot recommend highly enough the ultra-condensed survival guide by economist Joachim Klement, who published an update this morning. Spoiler: no, most conflicts do not have a lasting effect on the equity markets. Yes, selling in a hurry is almost always a mistake. The human reflex - extrapolating an end-of-the-world scenario from a missile -  is exactly what the market prices too highly. For things to really go wrong, you need two dictators with free time and the arsenal to go with it. It's not impossible, but it rarely happens.

Most of the time, wars don't kill markets, they temporarily disrupt narratives. Wall Street and European futures are bright red. The day before, the old continent had lost ground overall, while New York celebrated Oracle's results with a mini-rebound.

The S&P 500 is still less than 2% off its record highs and is up 2.8% in 2025 after erasing its heavy losses from the start of the year. The Stoxx Europe 600 is also very close to its peak, up 8.3% in 2025. However, the performance gap between the two sides of the Atlantic has narrowed to less than 6%, down from over 10% a month ago. In other words, the US market has outperformed in recent weeks.

In Asia-Pacific, rising tensions in the Middle East are translating into average declines. Japan and Hong Kong are down just over 1%. India is down 0.8%. Taiwan is down 1%, and Australia by 0.2%.

Today's economic highlights:

See the full calendar here.

  • GBP / USD: US$1.35
  • Gold: US$3,424.99
  • Crude Oil (BRENT): US$74.09
  • United States 10 years: 4.33%
  • BITCOIN: US$104,292

In corporate news:

  • WH Smith sees activist investor Palliser acquiring a stake to scrutinize leverage targets and capital allocation.
  • Earnz has raised GBP1.0 million to partially finance its acquisition of A&D Carbon Solutions.
  • NWF Group announced a trading update slightly ahead of market expectations.
  • Bango shares surged following a strategic partnership with KT Corporation.
  • Christie Group experienced strong demand for services, though finance brokerage growth remains subdued.
  • Novo Nordisk is advancing its obesity drug amycretin into phase 3 clinical trials.
  • Generali is reviewing Mediobanca's proposal to acquire Banca Generali in exchange for a stake.
  • Kesko Oyj experienced a 0.5% decrease in overall sales in May.
  • Biesse appointed Roberto Selce as the new CEO.
  • Meta Platforms invested in Scale AI, valuing the startup at over $29 billion.
  • AMD introduces new AI chips to rival Nvidia.
  • Nvidia adjusts financial forecasts by excluding China due to US export controls.
  • Moderna received US FDA approval for expanded use of its RSV vaccine.

See more news from UK listed companies here

Analyst Recommendations:

  • Halma Plc: Stifel maintains its hold recommendation with a price target raised from 2750 to GBX 3000.
  • Wizz Air Holdings Plc: Redburn Atlantic maintains its neutral recommendation with a price target reduced from GBX 1500 to GBX 1350.
  • Ashtead Group Plc: Redburn Atlantic maintains its buy recommendation with a price target reduced from 6500 to GBX 5500.
  • Gamma Communications Plc: Berenberg maintains its buy recommendation and reduces the target price from GBX 2000 to GBX 1570.
  • Tesco Plc: Bernstein maintains its outperform recommendation and raises the target price from GBX 430 to GBX 440.
  • British American Tobacco P.l.c.: Barclays maintains its overweight recommendation and raises the target price from 37.50 to GBP 41.
  • British Land Company Plc: Citigroup remains neutral recommendation with a price target reduced from GBP 4 to GBP 4.60.
  • Halma Plc: Barclays maintains its overweight recommendation and raises the target price from 29.25 to GBP 34.50.
  • Land Securities Group Plc: Citigroup remains neutral recommendation with a price target reduced from GBP 6 to GBP 7.60.
  • Mitie Group Plc: Jefferies downgrades to hold from buy with a target price of GBX 145.
  • Hochschild Mining Plc: Scotiabank initiates a sector outperform recommendation with a target price of GBP 3.50.
  • Astrazeneca Plc: Zacks maintains a neutral recommendation with a price target raised from 73 to USD 78.
  • Rentokil Initial Plc: Citigroup maintains its buy recommendation with a price target reduced from GBP 5.50 to GBP 4.70.
  • Tesco Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 400 to GBX 430.