What happened
The US launched strikes on Iran for the 11th consecutive night late on Tuesday, as Tehran warned the US against targeting its nuclear facilities. US Central Command said the wave of strikes were designed to continue degrading Iran's ability to threaten commercial shipping in the Strait of Hormuz. Iranian state media reported that air defences were activated in the capital Tehran, with explosions also reported in Tabriz, Chabahar, Konarak, and in Bushehr, home to Iran's only nuclear power plant.
Why it matters for the market
Iran, which has retaliated against the US and its Middle East allies, warned of reprisals after President Donald Trump said the US would soon hit an underground nuclear site near Natanz. Iran and the US agreed a ceasefire in April, but hostilities resumed last week as both countries battled over control of the vital Strait of Hormuz waterway.
Centcom said US forces had targeted Iranian military operations centres, maritime capabilities, aircraft hangars, drone storage facilities, and military logistics infrastructure. It also accused Iran of attacking more than 30 commercial vessels passing through the Strait of Hormuz over the past three months, endangering hundreds of innocent mariners and undermining freedom of navigation.
Kuwait's army said early on Wednesday morning that its air defences were engaging with drone attacks from Iran, while Bahrain and Jordan said they had also intercepted drone and missile strikes. Earlier, Trump said the next military target could be a complex known as Pickaxe Mountain, an underground nuclear site where Iran is suspected of building an undeclared enrichment facility. He added that he would not normally announce targets but there's not a thing they can do about it.
Iran's Khatam Al-Anbiya military command said it would consider such an attack as an expansion of war in the region, threatening strikes on all the interests of America, the allies and supporters. Trump also threatened to take care of the Houthi rebels if the Iran-backed militant group in Yemen followed through on its threatened blockade of Saudi ports.
A Houthi media official had earlier said they were closing the Bab al-Mandab Strait to Saudi vessels. Following the announcement, two tankers which had just loaded Saudi crude bound for China and India at Saudi Arabia's Red Sea port of Yanbu made U-turns on Tuesday, heading instead towards the Suez Canal. The threat from the Houthis risks further disruption to international shipping, with hostilities in the region having already led to global fuel prices fluctuating significantly.
What traders should watch
The war with Iran has cost the US some $37.5bn so far, a rise of nearly $8bn since the last estimate in May, Defense Secretary Pete Hegseth said on Tuesday. Appearing before the Senate Appropriations Committee, Hegseth said military training would have to be curtailed unless lawmakers approved an urgent funding boost.
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