TOKYO/LONDON :Global stocks fell and the dollar rose on Thursday, reflecting investors’ preference for perceived safe havens as concerns mounted over possible U.S. involvement in the Israel-Iran air war, which has ignited a rally in the oil price this week.

On the geopolitical front, President Donald Trump kept the world guessing about whether the United States would join Israel’s bombardment of Iranian nuclear sites, telling reporters outside the White House on Thursday: “I may do it. I may not do it.”

A flurry of central bank decisions in Europe highlighted how Trump’s erratic approach to trade and tariffs has complicated the job of central bankers in setting monetary policy.

In Europe, the STOXX 600 fell 0.6 per cent, set for a third day of declines, having dropped nearly 2.5 per cent on the week, which would mark its biggest week-on-week decline since the tariff-induced turmoil of April.

U.S. S&P 500 futures fell almost 1 per cent, although most U.S. markets – including Wall Street and the Treasury market – will be closed on Thursday for a public holiday.

“Market participants remain edgy and uncertain,” said Kyle Rodda, senior financial markets analyst at Capital.com.

Speculation was rife “that the U.S. will intervene, something that would mark a material escalation and could invite direct retaliation against the U.S. by Iran”, he added.

“Such a scenario would raise the risk of a greater regional conflict, with implications for global energy supply and probably economic growth.”

Much of the recent nervousness in markets has been centred around crude supply shocks from the Middle East, which has driven the price of crude oil up by 11 per cent in a week. Brent crude shot up 2 per cent to $78 a barrel on Thursday, close to its highest since January.

Gold traded around at $3,365 an ounce, slightly lower on the day.

The dollar itself rose broadly, leaving the euro down 0.2 per cent at $1.1462 and the Australian and New Zealand dollars – both risk-linked currencies – fell around 1 per cent.

CENTRAL BANK POLICY

The Federal Reserve left interest rates unchanged on Wednesday, much to Trump’s displeasure, and policymakers retained projections for two quarter-point rate cuts this year.

Fed Chair Jerome Powell struck a cautious note about further easing ahead, saying that he expects “meaningful” inflation ahead as a result of Trump’s aggressive trade tariffs.

Strategists at MUFG said the Fed “is underestimating the weakness in the economy that was present before the tariff shock, specifically, almost ignoring the cracks that have been visible in the labor market for years.”

On Thursday, the Bank of England left UK rates unchanged, as expected, and policymakers said trade policy uncertainty would continue to hurt the economy, triggering a drop in the pound.

The Norges Bank surprised markets on Thursday with a quarter-point cut that weighed on the crown currency, while the Swiss National Bank cut interest rates to zero, as expected, but the fact it did not go below zero gave the franc a lift, leaving the dollar down 0.1 per cent at 0.8184 francs.

In commodity markets, the price of platinum hit its highest in almost 11 years, near $1,300 an ounce, driven partly by what analysts said was consumers seeking a cheaper alternative to gold.

(Additional reporting by Kevin Buckland in Tokyo and Johann M Cherian in Bengaluru, Editing by Shri Navaratnam, Bernadette Baum and Ed Osmond)

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