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NEW YORK: A US attack on Iranian nuclear sites could lead to a knee-jerk reaction in global markets when they reopen, sending oil prices higher and triggering a rush to safety, investors said, as they assessed how the latest escalation of tensions would ripple through the global economy.

The attack, which was announced by President Donald Trump on social media site Truth Social, deepens US involvement in the Middle East conflict. That was the question going into the weekend, when investors were mulling a host of different market scenarios.

In the immediate aftermath of the announcement, they expected the US involvement was likely to cause a selloff in equities and a possible bid for the dollar and other safe-haven assets when trading begins, but also said much uncertainty about the course of the conflict remained.

Trump called the attack “a spectacular military success” in a televised address to the nation and said Iran’s “key nuclear enrichment facilities have been completely and totally obliterated.” He said the US military could go after other targets in Iran if the country did not agree to peace.

“I think the markets are going to be initially alarmed, and I think oil will open higher,” said Mark Spindel, chief investment officer at Potomac River Capital.

“We don’t have any damage assessment and that will take some time. Even though he has described this as ‘done,’ we’re engaged. What comes next?” Spindel said.

“I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It’s going to raise uncertainty and volatility, particularly in oil,” he added.

Spindel, however, said there was time to digest the news before markets open and said he was making arrangements to talk to other market participants.

Oil prices, inflation

A key concern for markets would center around the potential impact of the developments in the Middle East on oil prices and thus on inflation. A rise in inflation could dampen consumer confidence and lessen the chance of near-term interest rate cuts.

“This adds a complicated new layer of risk that we’ll have to consider and pay attention to,” said Jack Ablin, chief investment officer of Cresset Capital. “This is definitely going to have an impact on energy prices and potentially on inflation as well.”

While global benchmark Brent crude futures have risen as much as 18 percent since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13.

Before the US attack on Saturday, analysts at Oxford Economics modeled three scenarios, including a de-escalation of the conflict, a complete shutdown in Iranian oil production and a closure of the Strait of Hormuz, “each with increasingly large impacts on global oil prices.”

In the most severe case, global oil prices jump to around $130 per barrel, driving US inflation near 6 percent by the end of this year, Oxford said in the note.

“Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year,” Oxford said in the note, which was published before the US strikes.

In comments after the announcement on Saturday, Jamie Cox, managing partner at Harris Financial Group, agreed oil prices would likely spike on the initial news. But Cox said he expected prices to likely level in a few days as the attacks could lead Iran to seek a peace deal with Israel and the US.

“With this demonstration of force and total annihilation of its nuclear capabilities, they’ve lost all of their leverage and will likely hit the escape button to a peace deal,” Cox said.

Economists warn that a dramatic rise in oil prices could damage a global economy already strained by Trump’s tariffs.

Still, any pullback in equities might be fleeting, history suggests. During past prominent instances of Middle East tensions coming to a boil, including the 2003 Iraq invasion and the 2019 attacks on Saudi oil facilities, stocks initially languished but soon recovered to trade higher in the months ahead.

On average, the S&P 500 slipped 0.3 percent in the three weeks following the start of conflict, but was 2.3 percent higher on average two months following the conflict, according to data from Wedbush Securities and CapIQ Pro.

Dollar woes 

An escalation in the conflict could have mixed implications for the US dollar, which has tumbled this year amid worries over diminished US exceptionalism.

In the event of US direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said.

“Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger,” said Steve Sosnick, chief market strategist at IBKR in Greenwich, Connecticut. “It’s hard to imagine stocks not reacting negatively and the question is how much. It will depend on Iranian reaction and whether oil prices spike.”

JEDDAH: ������Ƶ is accelerating its push to diversify its economy by turning to major international events such as Formula 1, as the Kingdom uses global motorsports to support its non-oil goals. 

Since hosting its first Grand Prix in 2021, the Kingdom has funneled more than $6 billion into its sports industry, part of a broader plan to boost tourism, create jobs, and raise non-oil activities to 52 percent of gross domestic product — a 20 percent jump since the launch of Vision 2030.

With plans underway to move the race to Qiddiya City between 2027 and 2029, the Kingdom is deepening its investment in the sport as part of a broader strategy to stimulate economic activity and position itself as a global hub for elite sports and entertainment.

High-profile events such as the Formula 1 Grand Prix in Jeddah exemplify how international sporting platforms are being used to stimulate tourism and highlight the Kingdom’s economic transformation.

Tamer Al-Sayed, chief financial officer at the Future Investment Initiative Institute, told Arab News that Formula 1 was never just about cars on a track. “It was a high-velocity statement. A signal to the world that ������Ƶ is playing a new game — and playing to win,” he said.

Formula 1 has experienced a significant rise in popularity, with its global fan base reaching 826.5 million and viewership climbing to 1.6 billion in 2024, according to a recent report by PwC titled “������Ƶ’s motorsport ambition – Technology, investment and the future of racing.”

The global consultancy firm’s report noted that beyond Formula 1, motorsports are expanding into electric racing and other formats such as sports car and off-road competitions, driven by technological innovation and a worldwide push for sustainability.

Global popularity surged after Liberty Media’s 2017 acquisition of Formula 1 and the 2019 Drive to Survive series, which drew younger, more diverse audiences — doubling US viewership on ESPN and boosting sponsorship revenue to $632 million in 2024, according to PwC.

Economic impact

Flagship international events in ������Ƶ, like the Formula 1 Grand Prix, are playing a pivotal role in driving tourism, stimulating local commerce, and showcasing the Kingdom’s growing appeal as a global destination.

According to PwC’s report, ������Ƶ’s strategic investments in motorsports are positioning the Kingdom as a key player in the industry’s future.

The report said ������Ƶ is aggressively cementing its role in motorsports’ future.

“The Kingdom has committed over $6 billion to its sports industry since 2021, fueling the development of world-class venues like the Jeddah Corniche Circuit and the upcoming Qiddiya Speed Park,” it added. 

This global expansion reflects the sport’s soaring popularity, especially among younger audiences and emerging markets. ������Ƶ has managed to secure a long-term position in that landscape.

Yaseen Ghulam, associate professor of economics and director of research at Al-Yamamah University

However, the report emphasized that the success of a modern motorsport circuit relies not only on financial investment but also on innovation in fan engagement, race operations, and digital broadcasting to ensure long-term success.

With the Kingdom and the wider region increasing their investment in motorsports, new opportunities for economic growth and innovation are unfolding.

“As ������Ƶ and the broader MENA region invest in motorsports and advanced racing technologies, the opportunity to commercialize and expand these innovations into other industries grows exponentially,” the PwC’s report said.

Al-Sayed noted that the economic ripple effects of events like Formula 1 have moved beyond anecdotal observations and are now supported by measurable data.

“In pure numbers: Since the first Saudi Grand Prix in 2021, tourism linked to the event has driven six-figure visitor volumes annually. Hotels hit peak occupancy. Flights sell out. Local businesses — from luxury brands to food trucks — ride that wave. These aren’t soft indicators; they’re measurable economic inputs,” he added.

More importantly, Al-Sayed said, this is not a one-off surge but rather a case study in how a flagship event can anchor a broader sector.

“Entertainment and tourism — both once peripheral — are now pushing serious weight in the non-oil GDP mix. You can see the reflection in the Ministry of Tourism’s own targets: 150 million annual visitors by 2030, with sports and cultural events as core levers,” he added.

As for the event’s impact on employment, the chief officer said that it extends beyond temporary jobs, highlighting the emergence of an entire ecosystem encompassing event production, hospitality, and logistics, as well as digital media, security, and sponsorship management.

“Each Grand Prix fuels demand across this chain, and each year the local capability strengthens. So yes, F1 was expensive. But so was missing out on the future,” he said.

Al-Sayed expressed confidence that in a decade, the question will not be why ������Ƶ invested heavily in sports and entertainment, but rather how it anticipated the trend ahead of the rest of the world.

Yaseen Ghulam, associate professor of economics and director of research at Al-Yamamah University in Riyadh, said that Formula 1 is more than just a sport — it serves as a global platform for economic influence and visibility.

“The Las Vegas Grand Prix generated over $1.2 billion in economic activity, with racegoers spending nearly three times more than average tourists,” he said, noting that similar benefits are beginning to emerge in ������Ƶ.

He also mentioned that hotel prices in Jeddah during the 2021 Formula 1 race exceeded $450 per night, reflecting high demand and a significant impact on the local tourism and hospitality sectors.

“This global expansion reflects the sport’s soaring popularity, especially among younger audiences and emerging markets. ������Ƶ has managed to secure a long-term position in that landscape,” Ghulam added.

The associate professor went on to say that global sports events, such as Formula 1 or the Olympics, bring pride, increased productivity, and deliver higher well-being to nations through buzz, branding, and business potential.

“However, economic analysis of the costs and benefits, as well as financial risks, of hosting F1 is often overlooked. ������Ƶ has been hosting F1 events exceptionally well since 2021,” he said.

From Jeddah to Qiddiya

The Qiddiya megaproject in Riyadh, announced in March 2024, will feature one of the world’s most innovative motorsport tracks, with the configurable Speed Park Track located at the heart of Qiddiya City, positioning the Kingdom as a global racing destination.

Al-Sayed called Jeddah the proof of concept and Qiddiya the blueprint for ������Ƶ’s motorsports strategy.

He elaborated further on the success of the Jeddah circuit, noting: “When we launched the Jeddah circuit, the global motorsports community raised its eyebrows — and then had to admit it delivered. The fastest street circuit in F1, with a breathtaking Red Sea backdrop, timed perfectly with the Kingdom’s rising international profile.”

Al-Sayed called Qiddiya a masterstroke — a vision beyond a venue — designed to place Formula 1 at its core while driving growth in infrastructure, real estate, tourism, and creative industries. 

“It is one of those projects where the economic spillover is the point,” he said.

Echoing Al-Sayed’s remarks, Ghulam noted that when Qiddiya hosts its first Saudi Grand Prix — possibly in 2029 — it will undoubtedly make waves, following the strong precedent set by Jeddah.

“It would not be surprising if ������Ƶ opted to hold two races in the near future in accordance with Saudi Vision 2030, since F1 now hosts three races in the US – Miami, Austin, and Vegas,” Ghulam concluded.