When Donald Trump declared he had “obliterated” Iran’s main nuclear sites over the weekend of June 22, European markets responded with a choreography so familiar it verged on mechanical. Oil prices leapt like caffeinated gazelles, while stock indices sank in their typical geopolitical swoon. The only real surprise was that anyone was surprised.
According to Reuters, Brent crude rose 72 cents (0.93%) to $77.73 per barrel as of 08:06 GMT. U.S. West Texas Intermediate (WTI) climbed 71 cents (0.96%) to $74.55. Earlier in the session, both surged more than 3%, peaking at five-month highs of $81.40 and $78.40, respectively, before paring gains.
European indices reflected their usual sensitivity to Middle Eastern turbulence: the FTSE 100 dropped 0.5% to 8,828 points, the DAX fell 1.1% to 23,430, and the CAC 40 slipped 0.8% to 7,680. Precision in panic, it seems, is a market art form.
This swift reaction revealed a deeper truth: global finance has developed a near-Pavlovian reflex to any mention of military action in the Gulf. Years of algorithmically tuned responses to crises involving Iran have conditioned markets to react instantly, even before facts fully emerge.
What made this episode notable wasn’t the reaction—it was the expectation baked into it. Traders clearly viewed Trump’s support for Israel’s strike as a serious escalation, not mere bluster. That markets priced in genuine risk speaks volumes about how unpredictable even seasoned investors find Trump.
Oil’s predictable performance
The oil market’s response followed a script energy analysts know by heart. Brent crude jumped to $81.40; WTI to $78.40—both five-month highs—before sliding to more tempered levels. The pattern of initial spike followed by retreat is now standard during Middle Eastern flare-ups.
Sugandha Sachdeva of SS WealthStreet told Reuters the escalation “provides the fundamental catalyst for (Brent) prices to traverse higher and potentially spiral towards $100, with $120 appearing increasingly plausible.” These projections have become almost ritualistic—though they underscore how fragile Europe’s energy security remains.
Goldman Sachs warned Brent could temporarily hit $110 if Strait of Hormuz flows are halved for even a month. The firm’s fondness for worst-case scenarios reflects a client base eager to hedge against catastrophe—and reminds us how vulnerable Europe remains when Middle East tensions boil over.
Predictably, energy stocks gained: BP rose 1.5%, Shell 0.7%. Airlines, by contrast, suffered from higher fuel costs: IAG dropped 2.1%, as investors braced for tighter margins in an already-stretched sector.
European stocks feel the heat
European markets remain deeply exposed to oil shocks. Unlike the U.S., which enjoys relative energy independence, Europe remains tethered to global supply lines—especially those threading through volatile regions. This interdependence turns distant conflicts into domestic concerns.
Neil Wilson of Saxo Markets observed markets had become “headline-driven,” reacting to every twist in the Middle East. His remark that indices “lurched lower again on Tuesday after Trump left the G7 early” illustrates just how tightly wired European sentiment has become.
Sectoral impacts followed familiar lines: energy stocks up, transport and aviation down. More unexpectedly, defense contractors saw modest gains, anticipating increased military spending. Agricultural stocks also wobbled on fears of supply chain disruptions.
Currency markets echoed the tension. The euro weakened against the dollar as investors fled to U.S. assets. The pound dropped too, reflecting unease over Britain’s exposure to Gulf trade routes. These moves compounded market anxieties by making imports costlier and exports less competitive.
The Strait of Hormuz factor
The potential closure of the Strait of Hormuz loomed large. Roughly 20% of global oil flows through this narrow corridor, making it a perennial pressure point for global markets—and an existential threat for energy-dependent Europe.
Claude Moniquet, former French intelligence officer, bluntly stated that a blockade would be “a disaster for Europe.” That European markets took such warnings seriously shows how acutely they feel this exposure.
Iran’s parliament reportedly approved measures to close the strait—rhetoric that isn’t new, but felt more credible this time. Trump’s bombing of Iranian nuclear sites crossed a line previous presidents had carefully skirted, raising the risk of dramatic retaliation.
A strait closure wouldn’t just disrupt oil—it could trigger an international naval standoff and potentially drag NATO members into the conflict. The risk calculus for traders suddenly expanded well beyond energy prices.
Market memory and future fears
European markets have long memories. The 2019 Saudi Aramco attacks, tanker incidents, and Soleimani’s assassination all conditioned traders to expect the worst—and to bake those expectations into algorithmic responses.
The comparison to Ukraine is instructive. After Russia’s invasion, oil prices surged to $115 per barrel. This crisis has produced smaller jumps—so far—reflecting a perception of more limited scope or perhaps greater supply flexibility. But the risk of escalation remains very real.
For central banks, the timing is unfortunate. Just as inflation was beginning to ease, oil shocks threaten to reignite price pressures. Bank of Japan Governor Kazuo Ueda noted that sustained oil spikes could “affect inflation expectations”—a sentiment surely echoed in Frankfurt and Paris.
Longer term, this crisis may hasten Europe’s pivot to renewables. Yet that transition comes with its own costs—volatility, infrastructure gaps, and political pushback—that could weigh on markets for years.
Perhaps most unsettling is the question of American predictability. Trump’s unilateral decision to strike Iran, reportedly with minimal coordination with allies, raises new doubts about transatlantic unity. For European investors, that unpredictability is becoming another key risk—one not easily modeled.
The end of complacency
The Iranian crisis has reminded Europe just how fragile global supply chains—and geopolitical alliances—can be. The era of assuming stability in far-off regions is over. What comes next is an age of permanent vigilance.
Whether European markets can build the resilience needed to weather this new world remains to be seen. But if Trump’s Iran strike is any indication, volatility is not an anomaly—it’s the new normal.