Equities in the red after Israel's attack on Iran

Overnight, Israel launched a preemptive military strike against Iran, aiming to hit military infrastructure and components of Iran's nuclear program.

According to official sources, the Israeli Defense Forces deployed dozens of aircraft to strike multiple targets, including sites in the capital, Tehran. The operation, described by Prime Minister Benjamin Netanyahu as “necessary” and expected to continue “for as many days as needed,” now risks triggering a large-scale conflict.

This move comes in stark contrast to the position of the U.S. administration, which in recent weeks had intensified diplomatic engagement with Tehran in an effort to reopen negotiations over the sensitive nuclear issue. A new meeting between U.S. and Iranian delegates had been scheduled for Sunday.

Meanwhile, Iranian sources have confirmed the death of General Hossein Salami, head of the Islamic Revolutionary Guard Corps. Supreme Leader Ali Khamenei has also vowed that Israel “will face harsh punishment,” promising retaliation.

As diplomacy seems to be giving way to military action, markets are reacting with nervousness. Asian indexes immediately reflected the news, with Tokyo closing down by more than 1%. As is often the case in times of uncertainty, investors are retreating to safe-haven assets: gold has reversed course and is climbing again, reaching new highs in early trading.

Geopolitical risk is once again at the forefront, with potential repercussions extending to energy and currency markets in the coming days.

In recent times, tensions between Israel and Iran have continued to escalate, particularly following mutual military strikes in April 2024 and the killing of Hamas political leader Ismail Haniyeh in a targeted Israeli raid on Tehran in late July 2024. Both countries, due to their strategic positions and influence in the Middle East, aim to assert themselves as the region's dominant geopolitical power.

However, relations between the two states have not always been as hostile as they are today. In this article, we briefly explore the history of geopolitical relations between Iran and Israel in recent decades, and the historical roots of the current situation.