The tensions in the middle east seem to be rising constantly since it was reported that the US had suspiciously specific intelligence that Iran was planning an attack on oil tankers in the region, since then there has been an escalation in the war of words between the two nations and recent reports that two Saudi oil tankers were sabotaged yesterday evening, although nobody has claimed responsibility and it seems very coincidental that the intelligence would be reported and then an attack from Iran would happen only a few days later.
The US has said they are increasing their presence in the region, sending out large aircraft carriers while Iran has been quoted as saying they will strike back if needed.
But how will this affect the markets. Firstly we have to look at it from a global view, the escalation in tensions will only make investors nervous about the macroeconomic conditions and if there is instability or a potential war anywhere in the world then investors will want to move their money to safe havens in order for it not to be affected by potential spikes (up or down) in price.
Secondly the current situation could start to affect oil prices, if there is a danger of attacks on oil infrastructure in the region (especially if it affects Saudi Arabia output) then we could start to see investors worry about the potential oil supply risks which would mean an increase in oil prices.
As of now it remains to be seen as to whether the situation could worsen but for now it is definitely worth keeping an eye on due to its potential impact on the currency and oil markets.