A wave of risk aversion swept over markets on Friday and sent investors chasing after traditional safety assets such as the Swiss franc and the yen following reports that Israel attacked Iran in an escalation of conflict in the Middle East. 

Markets initially reacted sharply to the news, which sparked a huge selloff in risk assets, caused oil and gold prices to surge, and ignited a rally in U.S. Treasuries and safe-haven currencies.Some of those moves were later retraced as few details emerged about the attack and an Iranian official told Reuters no missile attack took place. 

Still, the Swiss franc, a traditional safe-haven currency, remained 0.35% higher on the day at 0.9089 per dollar, having rallied 1% earlier in the session. Moves in the Swissie were more pronounced against the euro, with the common currency last 0.4% lower at 0.96685 francs, after sliding as much as 1.5% earlier. 

The yen rose roughly 0.2% to 154.38 per dollar, after having rallied more than 0.6% in a knee-jerk reaction to reports of the attack.”It’s pretty obvious the market is nervous,” said Moh Siong Sim, a currency strategist at Bank of Singapore.”I think markets are at this stage in a flight-to-safety mode … Right now, we’re still in a situation where we know something has happened. But we need to understand the degree of retaliation,” Sim said.- Reuters

The United Nations Security Council meets on the situation in the Middle East at the UN headquarters in New York City on April 18, 2024.
| Photo Credit: AFP

Iran fired air defense batteries early Friday, April 19, 2024 morning after reports of explosions near the city of Isfahan, the state-run IRNA news agency reported.

It remained unclear if the country was under attack. However, tensions remain high in the wider Middle East after Iran’s unprecedented missile-and-drone attack on Israel.

IRNA said the defenses fired across several provinces. It did not elaborate on what caused the batteries to fire, though people across the area reported hearing the sounds.

The semiofficial Fars and Tasnim news agencies reported the sound of blasts, without giving a cause. State television acknowledged “loud noise” in the area.

Earlier, the commercial flights began diverting their routes over western Iran without explanation early Friday as one semiofficial news agency in the Islamic Republic reported “explosions” heard over the city of Isfahan. State television acknowledged “loud noise.”

The incident comes as tensions remain high in the wider Middle East after Iran’s unprecedented missile-and-drone attack on Israel.

Dubai-based carriers Emirates and FlyDubai began diverting around western Iran about 4:30 a.m. local time. They offered no explanation, though local warnings to aviators suggested the airspace may have been closed.

The semiofficial Fars news agency reported on explosions being heard over Isfahan near its international airport. It offered no explanation. However, Isfahan is home to a major airbase for the Iranian military, as well as sites associated with its nuclear program.

Iranian state television began a scrolling, on-screen alert acknowledging a “loud noise” near Isfahan, without immediately elaborating.

The Israeli military did not immediately respond to a request for comment.

Watch | Why is the Israel- Iran shadow war escalating?

| Video Credit:
Thamodaran B.

Even during the second world war, attacks on diplomatic missions were unheard of. According to the The 1961 Vienna Convention, embassy and consular premises should be protected even in times of war. But on April 1, Monday, an annex of Iran’s embassy in Damascus, the Syrian capital, came under air strikes.

At least 13 Iranians, including General Mohammad Reza Zahedi, the Quds Force commander who was in charge of the Revolutionary Guards’ Syria operations, were killed in the attack.

There’s no price in guessing who is behind the attack. Iran immediately blames Israel. Israel neither confirms nor rejects that it’s carrying out air strikes in Syria. But it’s now an open secret. A few days earlier, Israel had attacked a weapons depot in northern Syria, killing at least 38 Syrian soldiers and half a dozen Hezbollah fighters. A day after the embassy attack, Israel’s defence minister Yoav Gallant said, “We are in a multi-front war, offensively and defensively. We are acting everywhere and every day to prevent the strengthening of our enemies.”

Editorial | Escalation ladder: On Israel’s offensive, and the danger ahead

The recent spell of the crisis began on October 7, when Hamas, the Palestinian Islamist group that has Iran’s backing, carried out a cross-border attack in Israel, killing at at least 1,200 people. Since then, Israel has carried out dozens of air strikes in Syria and Lebanon, besides its full-throttled invasion of the Strip, hitting Iranian, Syrian and Hezbollah targets.