US and Israeli forces have begun a bombardment of Iran that has so far killed its supreme leader Ayatollah Ali Khamenei as well as the head of Iran’s military and some other senior military leaders. Iran has responded with missile strikes against Israel, US bases in the Middle East, and targets in many Gulf states. Iran has since replaced Khamenei with a three-member interim leadership council which has so far vowed to fight.
Brent crude prices initially jumped 12.6% to just over USD82/bbl, but are currently trading at USD78.5/bbl, about 7.2% higher than before the hostilities began. The Nikkei has opened 2.2% down while US equity futures are about 1% lower. The USD has rallied modestly, less than 1%, against most major currencies except the Swiss franc.
Despite these moves, our Chief Economist, Ray Farris is optimistic that hostilities will be short-lived and will not disrupt the global economy or positive Asian equity outlook significantly.
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