Iran and Israel exchanged direct strikes, marking a significant escalation in regional tensions and prompting sharp movements across energy and equity markets. Oil prices rose sharply as investors priced in geopolitical risk, while stock indices declined amid broader risk-off sentiment. The escalation threatens the fragile stability that has underpinned recent Middle East ceasefire efforts, creating heightened uncertainty around potential supply disruptions through critical energy infrastructure.

Markets face a stark two-way outcome: further military escalation could disrupt oil flows through the Strait of Hormuz, a chokepoint through which a substantial portion of global crude passes, while any de-escalation could rapidly reverse the current geopolitical premium embedded in prices. The coming days will likely focus on diplomatic efforts and military response signals from both nations, with energy traders monitoring shipping activity, official statements, and broader regional developments for clues about the trajectory of tensions.