The US military conducted a second day of strikes against Iran, prompting Tehran to retaliate against American allies in the Persian Gulf. The escalation marks a sharp departure from recent diplomatic engagement and threatens to upend fragile negotiations.

Oil markets reacted to the heightened geopolitical risk, with traders pricing in potential disruption to shipping lanes through the Strait of Hormuz. Energy producers and shipping companies face renewed uncertainty over transit security, while regional equity markets absorb the prospect of sustained conflict.

The attacks cast doubt on talks aimed at a permanent peace deal, which had offered a pathway to sanctions relief and normalized trade. European diplomats have urged restraint, but the cycle of retaliation complicates any return to the negotiating table.

For investors, the episode underscores how quickly military action can override diplomatic progress in the Middle East. Portfolio managers should assess exposure to Gulf energy infrastructure, shipping logistics, and sovereign debt tied to regional stability. The risk premium for Persian Gulf assets has effectively reset.