Bangkok, Mar 02: The US and Israeli attacks on Iran rattled world markets on Monday, with U.S. futures falling more than 1% and oil prices soaring, though gains for defense contractors and oil companies helped limit losses in Asian trading.

The futures for the S&P 500 and Dow Jones Industrial Average sank 1.7%.

The price of a barrel of US benchmark jumped 9% to $73 per barrel. Brent crude jumped nearly 10% to nearly $80 per barrel.

European markets opened sharply lower. Germany’s DAX dropped 2.2% to 24,737.47, while in Paris the CAC 40 lost 1.9% to 8,413.91. Britain’s FTSE 100 slipped 1% to 10,800.63.

Shares fell in most Asian markets but they rose in Shanghai, where higher oil prices lifted some oil company stocks such as CNOOC, China Petroleum & Chemical and PetroChina to the 10% limit.

The Shanghai Composite index climbed 0.5% to 4,182.59, while in Hong Kong, the Hang Seng lost 2.1% to 26,059.85.

Japan’s Nikkei 225 index initially fell more than 2%. It closed 1.4% lower at 58,057.24. Offsetting other losses, shares in defence-related stocks including Mitsubishi Heavy Industries and IHI Corp. advanced.

Australia’s S&P/ASX 200 ended flat, at 9,200.90.

In India, which could face disruptions to its access to oil due to the hostilities, the Sensex fell 2.1%.

Taiwan’s benchmark lost 0.9% and Singapore’s dropped 2.3%. In Bangkok, a major tourism destination for the Middle East, the SET fell 3.1%.

Markets were closed in South Korea for a holiday.

The price of gold, which usually is viewed as a safe haven for investment in times of uncertainty, rose 3.4% to about $5,426 per ounce.

The US dollar also gained, rising to 157.20 Japanese yen from 156.27 yen late Friday. The euro slipped to $1.1708 from $1.1762.

Traders are betting the war will disrupt oil supplies from Iran and elsewhere in the Middle East. Attacks throughout the region, including on two vessels travelling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, have constrained oil exports to the rest of the world.

“Roughly one-fifth of global oil and LNG (liquefied natural gas) flows squeeze through the Strait of Hormuz. This is not an obscure canal. It is the aorta of the global energy system,” Stephen Innes of SPI Asset Management said in a commentary.

A prolonged war would likely result in higher prices for other fuels and gasoline and could cascade throughout the global economy, adding to production costs overall.

Prolonged interruptions to oil flows through the Middle East would have “huge implications for oil and LNG and every market everywhere if it occurs. Energy is an input to ALL production,” RaboResearch Global Economics & Markets said in a report.

Iran exports roughly 1.6 million barrels of oil a day, mostly to China. It may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.

The size of China’s strategic oil reserves is a state secret. But a recent report by John Kemp of Base Research estimated them at 1.1 billion to 1.2 billion barrels –- equivalent to around 100 days or just over three months of imports.

The war’s impact on markets was muted somewhat because the attacks were anticipated, with a massive buildup of U.S. forces in the Middle East. So traders had adjusted their positions to take that risk into account.

The conflict has shifted attention, for now, away from issues surrounding artificial intelligence that have dominated markets in recent months.

On Friday, the S&P 500 fell 0.4% to finish just its second losing month in the last 10. The Dow industrials dropped 1.1%, and the Nasdaq composite fell 0.9%.

Treasury yields fell in the bond market as investors sought safer places for their money.

“When markets are fragile, they do not need a knockout blow. They just need another weight on the bar,” Innes said.

Also hurting the broad market was a report Friday showing that inflation at the U.S. wholesale level was at 2.9% last month, much higher than the 1.6% that economists expected.

That could pressure the Federal Reserve to hold off longer on its cuts to interest rates. Lower rates would give the economy and prices for investments a boost, but they risk worsening inflation.

London, Mar 2: A British Royal Air Force (RAF) base in Cyprus was hit by an Iranian one-way attack drone during the ongoing US and Israeli strikes launched on Tehran over the weekend, confirmed by Cypriot President Nikos Christodoulides on Monday.

The UK’s Ministry of Defence (MoD) said RAF Akrotiri sustained “minimal damage” on Sunday at around midnight local time, with no casualties reported.

It came hours after Prime Minister Keir Starmer’s video statement announcing the UK’s decision to allow the United States permission to use British bases for “limited defensive” operations to protect British lives and interests in West Asia.

“Our base and personnel continue to operate as normal protecting the safety of Britain and our interests,” an MoD spokesperson said.

Family members at the base will be moved to alternative accommodation as a precautionary measure under a “temporary dispersal notice” for the British military base.

“All other locations, workplaces, businesses and facilities will remain open as normal and there are no restrictions in place,” the MoD said.

The attack came in the wake of Starmer’s updated statement on the conflict in the region, which led to the killing of Iran’s Supreme Leader Ayatollah Ali Khameni.

“Our partners in the Gulf have asked us to do more to defend them, and it is my duty to protect British lives. We have British jets in the air as part of coordinated defensive operations which have already successfully intercepted Iranian strikes,” Starmer said from 10 Downing Street.

“But the only way to stop the threat is to destroy the missiles at source – in their storage depots or the launchers which used to fire the missiles. The United States has requested permission to use British bases for that specific and limited defensive purpose.

“We have taken the decision to accept this request – to prevent Iran firing missiles across the region, killing innocent civilians, putting British lives at risk, and hitting countries that have not been involved,” he said.

Setting out the legal basis in international law of the decision alongside the announcement, the UK PM stressed Britain is “not joining the strikes” and the latest move was about “collective self-defence”.

“I want to be very clear: we all remember the mistakes of Iraq, and we have learned those lessons. We were not involved in the initial strikes on Iran and we will not join offensive action now.

“But Iran is pursuing a scorched earth strategy – so we are supporting the collective self defence of our allies and our people in the region,” he said.

According to the BBC, the US is likely to use RAF Fairford in Gloucestershire, south-west England, and Diego Garcia in the Indian Ocean for strikes on Iranian missile sites.

Meanwhile, the UK is mounting an operation to support around 200,000 British nationals in the Gulf caught up in the strikes. Officials are said to be formulating potential plans to evacuate them, largely holidaymakers, should the airspace in the region remain closed for longer.

Starmer addressed the issue in his address: “We have at least 200,000 British citizens in the region – residents, families on holiday, and those in transit. I ask all our people in the region to please register your presence and follow Foreign Office travel advice.

“I know this is a deeply worrying time and we will continue to do all we can to support you.”

The Foreign, Commonwealth and Development Office (FCDO) has asked British nationals in Bahrain, Israel, Kuwait, the Palestinian territories, Qatar and UAE to register their presence to receive updates.