Iran’s Promise of Payback Keeps World Powers, Markets on Edge

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(Bloomberg) — Iran vowed retaliation and kept up attacks on Israel following the US strikes on its nuclear facilities over the weekend, fueling fears of a wider war in the Middle East and rattling global markets.

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The Islamic Republic fired another missile against Israel on Monday, while Israeli forces kept up strikes on Iranian military sites and airports.

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Israeli Prime Minister Benjamin Netanyahu pledged in a news conference to continue Israel’s military campaign in Iran as well as in the Gaza Strip.

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Tehran has yet to announce whether or how it might strike American targets in the Middle East. President Donald Trump’s decision to deploy bunker-busting bombs and cruise missiles on the country’s three main nuclear sites on Sunday pushed the Middle East into uncharted territory and boosted risks in a global economy already facing severe uncertainty over his trade wars.

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Oil rose by nearly 6% when markets opened in Asia before paring most of those gains, with Brent trading at $77.65 per barrel as of 8:37 a.m. in London. US stock futures initially declined as investors weighed retaliation scenarios and the risks to global energy supplies.

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“An expanding conflict adds to the risk of higher oil prices and an upward impulse to inflation,” said Bloomberg Economics analysts including Ziad Daoud.

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The extensive US operation — which targeted nuclear sites at Fordow, Natanz, and Isfahan — included 125 aircraft, strikes by Tomahawk missiles from a submarine and the use of 14 Massive Ordnance Penetrator bombs, the first time the large bunker busters were used in combat.

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It also marked the US entry into the war that began on June 13 when Israel unleashed attacks on Iran’s nuclear and military facilities, and killed senior commanders and atomic scientists. US Defense Secretary Pete Hegseth said the strikes had a “limited” objective, focused on destroying Iran’s atomic program.

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At the United Nations on Sunday, Iranian Ambassador Amir Saeid Iravani told an emergency Security Council meeting that the “timing, nature and scale” of Tehran’s response “will be decided by its armed forces.”

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The Islamic Revolutionary Guard Corps, which answers to the Iran’s Supreme Leader Ayatollah Ali Khamenei, said it would continue targeting Israel and cited American bases in the region as a vulnerability for the US, without openly threatening them. 

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Trump said he would respond with “far greater” force to any Iranian retaliation on US assets. He also floated the possibility of regime change in Iran, although US officials, including Secretary of State Marco Rubio, have said it’s not their objective.

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Israeli officials have said while toppling Iranian government isn’t a war objective, their attacks could undermine the government to the extent that that happens.