New York Stock Market Plummets - Iran Launches Ballistic Missile Retaliation

military conflict, New York Stock Exchange, Irans retaliation

Background of Military Conflict

On June 13, 2025, local time, the New York Stock Exchange reacted strongly and plummeted due to a sudden military conflict in the Middle East. On this day, Israel launched a large-scale airstrike ('Operation Rising Lion') against Iran's nuclear and military facilities, and in retaliation, Iran executed 'Operation True Promise III', firing hundreds of ballistic missiles and drones. As a result, the Dow Jones Industrial Average fell by 769.83 points (-1.79%) to close at 42,197.79, while the S&P 500 and Nasdaq also showed declines of -1.13% and -1.30%, respectively.

The Spread of Fear Psychology and the Preference for Safe Assets

The VIX, which shows the market's anxiety, surged by an astonishing 16.9%, indicating that investors have rapidly shifted into risk-averse mode. Consequently, U.S. Treasury bonds and gold prices rose, bolstered by a preference for safe assets. At the same time, oil prices soared, with West Texas Intermediate (WTI) jumping by 79% in just one day, reaching around $7374 per barrel, and Brent crude also rose to a similar level.

Geopolitical crisis simultaneously stimulates concerns about inflation and recession.

Market experts are warning that this situation could lead to a "stagflationary shock" beyond mere price fluctuations. The sharp rise in oil prices may trigger a dual shock of rising costs due to supply chain disruptions and reduced consumer spending. Goldman Sachs has warned that supplies of Iranian crude could decrease by up to 1.75 million barrels per day, while JP Morgan has analyzed that in the worst-case scenario, oil prices could rise to $120. However, both institutions have diagnosed that the likelihood of a blockade of the Strait of Hormuz is low.

Possibility of the Spread of Military Conflicts and Political Responses

Israel is reportedly planning to continue this operation for at least 14 days, and Iran has also officially used the term 'declaration of war,' further escalating tensions. The Israeli Defense Minister warned that attacks on civilian areas have 'crossed the red line,' and Iran has abruptly canceled negotiations with the United States over the weekend. With the possibility of further clashes emerging, it is unlikely that military tensions in the Middle East will ease anytime soon.

Trump's Warnings and Financial Market Outlook

In this situation, former President Donald Trump pressured Iran for a nuclear deal through social media, warning that "Israel's next attack will be more severe." He also mentioned that "preventing Iran from obtaining nuclear weapons could be beneficial for the financial markets in the long run."

Market Reactions and Sector Performance

On this day, the stock market saw strength in energy and defense-related stocks. Chevron, Lockheed Martin, and Palantir closed higher, while travel-related stocks such as airlines and cruise lines showed weakness, and most semiconductor and big tech sectors also declined. However, Tesla rose ahead of its robo-taxi launch due to expectations of regulatory easing, and Oracle set a record high on strong earnings.

US economic indicators and inflation expectations

The preliminary consumer sentiment index for the University of Michigan in June is 60.5, which represents a significant rebound from last month's final figure of 52.2, marking a turnaround to an upward trend for the first time in six months. Notably, the one-year expected inflation rate has dropped significantly to 5.1%, down from 6.5% in the previous month. This suggests that consumers continue to maintain their expectations of having passed the peak of inflation, despite rising energy prices.

Market observation points for the future

Several global investment banks are paying attention to whether the current Middle East situation will result in a short-term shock or have long-term structural implications. UBS has assessed that the direction of oil prices ultimately depends on Iran's further responses, while Capital Economics mentioned the possibility of rising government bond yields if oil prices transition to a long-term upward trend.

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