U.S. Launches Major Combat Operations in Iran, Targeting Tehran Ministries
U.S. President Donald Trump has confirmed the initiation of "major combat operations" in Iran, marking a decisive escalation that has immediately triggered volatility across global energy and equity markets. The military action involved targeted strikes on several ministries in southern Tehran, with an unidentified Iranian official confirming the attacks to Reuters. Visual evidence from the scene includes a plume of smoke rising over the capital following a reported explosion on February 28, 2026.
The deployment signals a shift from the previous geopolitical flashpoints involving Venezuela to a scenario with far more profound implications for global supply chains. Florian Weidinger, chief investment officer at Santa Lucia Asset Management, noted that while Venezuela's heavy, sour crude is prized by specific refineries, the current situation in Iran represents a systemic risk. "This has definitely bigger ramifications than Venezuela," Weidinger stated, emphasizing that the market must now price in the potential disruption of critical energy chokepoints rather than just a specific grade of oil.
Hormuz Chokepoint Threatens 31% of Global Seaborne Crude Flows
The core of the market's anxiety lies in the Strait of Hormuz, the narrow waterway between Oman and Iran that serves as a vital artery for global energy trade. According to data from market intelligence firm Kpler, approximately 13 million barrels per day of crude oil transited the strait in 2025, accounting for roughly 31% of global seaborne crude flows. This stands in stark contrast to the Venezuelan crisis, which Kenneth Goh, director of private wealth management at UOB Kay Hian in Singapore, described as a "production story" rather than a "chokepoint story." Goh highlighted that while Venezuela's peak production reached 3.5 million barrels per day in the 1990s, its current output averages 800,000 barrels per day, limiting its systemic impact compared to a potential closure of the strait.
Historical precedents offer a template for market behavior. In June 2025, equities sold off sharply at the open following an Israeli strike on Iranian nuclear sites, only to recover once it became clear the strait remained open. However, the current confirmation of major combat operations suggests a higher probability of disruption. Goh noted that investors are now anticipating a flight to safety, driving demand for the U.S. dollar, Japanese yen, and gold, while oil prices are poised to react violently.
Market Outlook: Equity Slump and Oil Surge Expected
Analysts are bracing for a "rough and risk-off" open on Monday, with Alicia García-Herrero, chief economist for Asia-Pacific at Natixis, forecasting significant downside for risk assets. García-Herrero expects global equities to potentially drop 1% to 2% or more, driven by the uncertainty of the conflict's trajectory. In the bond market, she anticipates U.S. Treasury yields to fall 5 to 10 basis points as capital seeks safety. The energy sector faces the most immediate shock, with García-Herrero projecting oil to jump 5% to 10% as the market prices in the risk of supply interruptions.
The duration of the conflict will likely dictate the severity of the market's reaction. David Roche of Quantum Strategy described the potential U.S. objective as a "regime change endeavor" that could last three-to-five weeks. If the operation remains short and contained, the resulting risk-off move and oil spike may be brief. However, Roche warned that if the conflict extends into a prolonged engagement, markets would react "rather badly" as investors price in a wider war and sustained oil disruption. Billy Leung, an investment strategist at Global X ETFs, added that prolonged retaliation by Iran would be particularly damaging to Asian markets, given their heavy reliance on stable energy supplies and trade routes, likely causing heightened volatility in high-beta and cyclical sectors.
While the U.S. administration previously announced a hike in tariffs on all imports to 15% and recently captured former Venezuelan President Nicolás Maduro, the focus has now shifted entirely to the Middle East. García-Herrero cautioned investors against making "hero bets" before Iran's response is known, advising a wait-and-see approach as the geopolitical landscape shifts rapidly.
Source: CNBC | Analysis by Rumour Team