Dow Futures Crash 500 Points, European Stocks Open Lower as Investors Dump Equities Amid Israel-Iran Tensions

US stock futures tanked early Friday after Israel's airstrike on Iran. Israel's defence minister, Israel Katz, declared a special state of emergency following the attack that rocked Tehran. In retaliation, Iran supposedly launched over 100 drones at Israel, which were neutralised in a coordinated response by 200 fighter jets, according to Israel.

'We struck at the heart of Iran's nuclear enrichment programme' and ballistic missile program, Israel's prime minister, Benjamin Netanyahu, had stated. He added that the operation would continue 'for as many days as it takes to remove this threat,' stoking fears of a new war in the region.

Iran's Supreme Leader Ayatollah Ali Khamenei said Israel will 'pay a very heavy price' and should 'expect a severe response from Iran's armed forces.'

The major escalation dragged down futures tied to the Dow Jones Industrial Average by 1.17% or 504 points, while S&P 500 futures and Nasdaq 100 futures declined by 1.25% and 1.35%, respectively.

Furthermore, European shares opened lower on Friday as investors reacted to the Middle East developments, aggressively offloading shares. This was reflected in the pan-European Stoxx 600, which fell 1% a few minutes after the market opened.

Elsewhere, Germany's DAX dropped by 1.4% in early trade, while the French CAC 40 tanked by 1.1%. The FTSE 100 in London declined by 0.5%.

'The news has led to significant fears about an escalation and a wider regional conflict,' Deutsche Bank strategists said in a note early Friday. 'The effects of the attack have cascaded across global markets, with a strong risk-off move for several asset classes.'

Israel's announcement of targeting Iran's nuclear programme took global markets by surprise. At the same time, investors flocked towards assets like precious metals to hedge against market volatility.

Gold prices surged toward record highs as spot prices of the precious metal jumped 1.16% to £2,525 ($3,424) per troy ounce during US premarket hours. Gold futures for August delivery also rose 1.25%.

The most significant changes were observed in oil prices as crude futures soared as high as 13% following the airstrike, marking the largest single-day gains in years as rising tensions sparked fear of potential oil supply disruption.

Meanwhile, US West Texas Intermediate was up 7.4% at £53.9 ($73.1) per barrel as global benchmark Brent surged 6.8% to £54.7 ($74.2) per barrel.

The prices of assets like gold in the near term will likely depend on Iran's retaliation and also on talks between the US and Iran over their nuclear programme, according to Deutsche Bank analysts.

'Iran cannot have a nuclear bomb, and we are hoping to get back to the negotiating table,' US President Donald Trump had told a US news outlet. 'We will see.'

Gold prices have jumped during major recessions in the past half-century, surging during nearly all market crashes, given its negative correlation with stock markets and store-of-value attributes. Investors are increasingly allocating gold in their portfolios through exchange-traded funds, which offer exposure to the precious metal without the hassles and costs of handling and securing physical bullion.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.