US Strikes Iran Amid Rising Oil Prices, Dollar Steady at 3.04 Shekels

The foreign exchange market showed minor movements both locally and globally following another night of US military strikes in Iran and a continued rise in oil prices. The US dollar traded at 3.04 shekels, while the euro hovered around 3.47 shekels. Globally, the US dollar index remained stable at 101.0 points against a basket of major currencies, with the euro steady above $1.14 and the British pound around $1.34.

The US Central Command (CENTCOM) announced it had launched additional attacks in Iran under orders from the top commander, aiming to further diminish Iran's ability to threaten freedom of navigation in the Strait of Hormuz. In retaliation, Iran's Revolutionary Guards claimed to have struck four US military bases in Kuwait and Bahrain early this morning. Kyle Rodda, a senior financial markets analyst at Capital.com, said the renewed Middle East tensions are unsettling global markets and reintroducing a war risk premium to financial assets. He noted that the biggest indirect impact of rising oil prices is on inflation and interest rates worldwide, potentially accelerating the Federal Reserve's next rate hike.

Or Furia, chairman of Furia Finance, commented that unless the escalation develops into a prolonged conflict affecting global energy supply, long-term economic effects are unlikely. He suggested current volatility might create investment opportunities and emphasized that market reactions are largely driven by media noise rather than fundamental economic changes, citing recent shifts in US political rhetoric.

Meanwhile, Bank of Israel Governor Amir Yaron told Calcalist that tax increases will be unavoidable to cover rising defense expenditures. He stressed the need for comprehensive tax reform, noting the high tax burden on the top income deciles and lower burdens in the middle. Yaron said efficiency improvements and increased workforce participation alone will not suffice.

In China, June inflation data showed a 0.3% monthly drop in the consumer price index, slightly exceeding forecasts, with annual inflation slowing to 1.1%. Core inflation excluding food and energy rose by 1%, while food prices declined by 1.6% year-over-year. The producer price index increased 4.1% annually, the highest since July 2022, though it fell 0.3% month-over-month.