Crude prices rallied Wednesday following a report that US intelligence suggested Israel was planning a strike on Iranian nuclear facilities, which would send geopolitical tensions into overdrive and fuel regional conflict fears.
While safe haven gold pushed higher, the news from CNN appeared to be having little detrimental effect on Asian equities, with most extending the previous day's rally, AFP reported.
European stock markets faltered, however, with the Paris CAC 40 down almost one percent in midday deals, reads a news report prepared by the Paris-based international news agency.
London fell and the pound strengthened against the dollar after UK inflation data come in well above forecasts in April, added AFP.
The dollar also lost pace against the euro and yen ahead of an upcoming G7 finance ministers meeting this week, with speculation growing that President Donald Trump is open to a weaker greenback to help US exporters.
"Middle Eastern tensions are driving price action in the commodity space," Kathleen Brooks, research director at XTB trading group, told AFP. "Israel's threat to strike Iran is causing this uplift," she added.
According to CNN, it’s not clear that Israeli leaders have made a final decision, and that in fact, there is deep disagreement within the US government about the likelihood that Israel will ultimately act but how Israel strikes will likely depend on what it thinks of the US negotiations with Tehran over its nuclear program.
“The chance of an Israeli strike on an Iranian nuclear facility has gone up significantly in recent months,” CNN quoted another person familiar with US intelligence on the issue as saying. “And the prospect of a Trump-negotiated US-Iran deal that doesn’t remove all of Iran’s uranium makes the chance of a strike more likely.”
According to AFP, investors are keeping tabs also on China-US relations after Beijing hit out at Washington's "bullying" over chip export controls, just over a week after the two sides dialled down trade tensions by temporarily slashing tit-for-tat tariffs.
Both main crude contracts jumped around one percent after CNN reported multiple US officials as saying the government had received intelligence indicating Israel was preparing to target Iranian atomic facilities.
There are fears that such a sharp escalation could tip the Middle East into a war, with tensions already high over Israel's strikes on Gaza.
Trump said last week that "I think we're getting close to maybe doing a deal" on Tehran's nuclear programme and then a day later called on the Islamic republic to "move quickly or something bad is going to happen".
But Iran's supreme leader Ayatollah Ali Khamenei warned Tuesday that nuclear talks with Washington were unlikely to yield any results after four rounds of Omani-mediated nuclear talks with the United States since April 12.
"Crude will maintain a risk premium as long as the current talks appear to be going nowhere," AFP quoted Robert Rennie, at Westpac Banking Corp, as saying.
Crude prices have risen around 15 percent since the start of the month on softening worries about the economic outlook as tariff tensions grow relatively calmer, added the news agency. (With inputs from AFP and CNN)
