Cryptocurrency prices fell Saturday evening after Iran launched a wave of drones at Israel, marking an early indication of the turmoil that could hit markets as investors start to price in the threat of a broader Middle East war.
Bitcoin was down 5% from its price on Friday, while ether sank more than 7%, and XRP tumbled 13.5%, according to CoinMarketCap. That’s a sign risk assets will be under pressure.
A fuller picture of Wall Street’s reaction to Iran’s first-ever, full-scale military assault on Israel will come on Sunday evening, when futures trading opens in the U.S. for stocks, bonds, commodities and currencies.
Trading on Friday offered somewhat of a preview on what to expect. Reports at the time said an Iranian attack on Israel was expected within two days, boosting U.S. benchmark oil prices as much as 3% to top $87 a barrel.
U.S. Treasury bonds also rallied sharply, sending the 10-year yield down as much as 10 basis points as investors looked for safety.
Similarly, the U.S dollar advanced as the geopolitical tensions caused investors to turn away from riskier emerging-market currencies.
Even the euro fell to a five-month low against the greenback, as markets also weighed the prospect of the European Central Bank cutting rates before the Federal Reserve does.
Meanwhile, prices for gold—traditionally seen as another safe-haven asset—surged to a fresh record high above $2,400 an ounce before later reversing those gains late Friday.
Stocks sold off on Friday, led by risk-on tech shares, as investors also digested bank earnings and fresh inflation data that further dampened hopes for imminent Fed rate cuts.
Mideast tensions have been ramping up since militants backed by Iran attacked Israel in October. Other Iranian-backed groups in Lebanon, Iraq, Syria and Yemen have also launched rockets at Israel.
More recently, Tehran blamed Israel for an April 1 airstrike in Syria that killed two Iranian generals, though Israel hasn’t addressed it.
With Iran attacking Israel, the risk grows that the U.S.—Israel’s most important military ally—could be also be drawn into direct engagements with Iran. On Saturday, the White House vowed to support Israel’s defense, after moving more Navy ships toward the region in anticipation of an attack.
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