US and Iran Trade Strikes Amid Ongoing Tensions

The US and Iran exchanged direct strikes over the weekend into July 13, with US Central Command carrying out strikes on Iranian military sites after accusing Iranian forces of attacking a Cyprus-flagged container ship transiting the Strait of Hormuz. Iran retaliated with missile and drone attacks against US Gulf allies including the UAE, Qatar, Kuwait, Oman and Bahrain, widening the conflict beyond the two direct combatants.

Oil prices spiked in response, with Brent crude surging more than 4% amid fears of a Strait of Hormuz closure, the chokepoint through which roughly a fifth of global oil supply passes. Maritime traffic through the strait has thinned sharply since the renewed fighting, with tanker crossings falling to a five-week low, well below the 18 to 22 daily crossings seen earlier in the month, as shipping companies reroute or pause transits given the security risk.

Despite the escalation, world equity markets showed a mixed and largely contained reaction, suggesting investors are for now treating the exchange as a contained flare-up rather than a full regional war. That read could shift quickly if the strait faces an actual closure attempt or if strikes broaden further across the Gulf. For markets, the variables to watch are whether the prior ceasefire framework can be restored, Iran's capacity to sustain multi-country attacks, and whether the oil-supply shock feeds into inflation expectations already central to the Fed's next policy decisions.