Israel vows continued attacks as oil rises 3% on Middle East risk

Israel's military said it will continue launching attacks as needed, extending a conflict that has already pushed Brent crude above $78 a barrel and sent gold to $2,365 as investors priced in a prolonged period of Middle East instability.

"The struggle is not yet over, and further challenges lie ahead," Israeli Prime Minister Benjamin Netanyahu said Wednesday, according to a statement from his office, hours after the military's announcement. "They require calm judgement, steadfast defense of Israel's security interests, and at the same time the preservation of our vital relationship with our American friends."

The escalation comes just one day after the US and Iran finalized a nuclear deal on June 17 that calls for "an immediate and permanent termination of military operations on all fronts, including in Lebanon." Netanyahu has not directly commented on the agreement, though he reiterated Wednesday that Israeli forces would maintain a security zone in southern Lebanon "for as long as Israel's security needs demand it."

Brent crude rose 3.2 percent to $78.45 a barrel in early trading, extending gains as traders weighed the risk of supply disruptions across the region. The Strait of Hormuz handles about 21 percent of global oil consumption, and any escalation involving Iran raises the prospect of chokepoint disruption. West Texas Intermediate climbed 2.8 percent to $74.60.

Gold advanced 1.2 percent to $2,365 an ounce, the highest in three weeks, as the geopolitical risk premium expanded. The US dollar index gained 0.4 percent against a basket of major currencies, while the 10-year US Treasury yield fell 6 basis points to 4.18 percent as investors rotated into government debt.

The last time Israel faced a comparable multi-front military posture was during the 2023-2024 campaign in Gaza, when Brent crude briefly touched $92 before retreating as supply disruptions failed to materialize. The current situation carries additional risk given the Iran dimension: the nuclear deal's terms address enriched uranium stockpiles but make no mention of Iran's missile program, a key Israeli concern.

US President Donald Trump excoriated Netanyahu hours before the deal was announced, calling him "a very difficult guy" and saying Israel "should be very thankful to us for doing this. Because if Iran had a nuclear weapon, Israel wouldn't be around for two hours." The Axios news website reported that Trump was troubled by the scale of civilian casualties in Lebanon and objected to Israel leveling entire buildings to eliminate a single Hezbollah commander.

Equity markets reflected the risk-off mood. The S&P 500 fell 0.8 percent in early trading, with the energy sector the only gainer as crude-linked stocks rose. The Nasdaq 100 dropped 1.1 percent as technology shares led declines. The CBOE Volatility Index climbed to 18.7, up from 16.2 at the prior close.

The divergence between US and European exposure to Israeli sovereign debt underscores the financial stakes. Allianz and its PIMCO subsidiary held $2.67 billion in Israeli government bonds as of September 2025, representing 51.8 percent of all non-Israeli holdings tracked by Profundo, an Amsterdam-based research firm. US investors held $2.02 billion as of March 2026, up from $879 million in November 2024, while several European pension funds have moved to divest.

For markets, the key question is whether the Iran deal can hold despite Israel's objections. If military operations expand further, Brent could test the $85 level last seen during the Gaza campaign's peak. If the agreement stabilizes the region, the risk premium could unwind quickly, with gold likely to give back half its gains within two weeks based on the historical pattern following the 2020 Iran-US tensions.

This article is for informational purposes only and does not constitute investment advice.