Iran’s missile strike on U.S. base escalates Middle East tensions, raising fears of broader conflict

Iran Missile Counterattack Targets U.S. Base

On Monday local time, Iran launched several missiles at the U.S. Al Udeid Air Base in Qatar in retaliation for the U.S.'s prior airstrike on its nuclear facilities. Al Udeid is the U.S. Central Command's main base in the Middle East and the largest U.S. military hub in the region.

According to the official report from Qatar, all missiles were successfully intercepted, causing no casualties. Due to the U.S. military's anticipation of escalating tensions, some personnel had been evacuated in advance. The importance of Al Udeid Base lies in its strategic command role in U.S. operations in the Middle East, and its location across the sea from Iran makes it geopolitically sensitive.

Tanker Rates Reach Two-Year High as Persian Gulf Routes Face Increased Pressure

The military conflict quickly exerted pressure on the energy market. Data from the Baltic Exchange in London shows that daily charter rates for VLCCs (Very Large Crude Carriers) carrying 2 million barrels of crude oil increased by 12%, reaching $76,000, the highest since March 2023.

Following Israel's missile attack on Iran, regional shipping risks have sharply increased. Multiple shipowners are demanding higher freight rates for navigating through the Strait of Hormuz, with fees for the relevant routes more than doubling compared to pre-conflict levels. Currently, several navies have issued maritime safety warnings, although overall shipping channels have not yet been disrupted.

Global Aviation Impacted, Gulf Nations Preemptively Close Airspace

In addition to maritime transport, the aviation sector has also been affected. Before news broke of the Iranian missile strikes, the UAE and Bahrain announced the closure of parts of their airspace to avoid potential risks to civilian aircraft. Several international airlines adjusted their routes to bypass the Persian Gulf and surrounding areas. Airline operators have generally raised the cost of risk insurance, and it is expected that flight arrangements will remain strained in the short term.

Federal Reserve's Moves Watch Closely, Officials Hint at July Rate Cut

Amid the backdrop of spreading geopolitical conflict, the monetary policy direction of the Federal Reserve has drawn significant market attention. Several Fed officials have recently stated that current international risks could accelerate the slowdown of the U.S. economy, providing more policy space for a rate cut. Recent statements suggest that if the inflation trend continues to moderate, a rate cut in July might become a real possibility.

Especially with crude oil futures briefly falling by 6%, market expectations for demand have become more conservative, creating a "breathing" window for the Fed's policy execution. However, the uncertainty of external shocks also makes policymakers inclined to be cautious.

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