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Wary investors move to "risk off" mode as geopolitical

tension

mounts

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Crude oil prices spike higher on outbreak of hostilities

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US VIX volatility measure at highest point in 3 weeks

By Saqib Iqbal Ahmed, Suzanne McGee, Linda Pasquini

NEW YORK/GDANSK, June 15 (Reuters) - Investors were on

edge as financial markets reopened on Sunday, with crude oil

prices initially up near 4% as markets were gripped by the

escalating threat of a sweeping conflict in the Middle East.

U.S. stock futures opened marginally lower.

Israel and Iran launched fresh attacks on each other on Sunday,

killing and wounding civilians and raising concerns of a broader

regional conflict, with both militaries urging civilians on the

opposing side to take precautions against further strikes.

Yemen's Iran-aligned Houthis joined the fray.

Images from Tehran showed the night sky lit up by a huge

blaze at a fuel depot after Israel began strikes against Iran's

oil and gas sector - raising the stakes for the global economy

and the functioning of the Iranian state.

"The market is very headline-driven and short-term focused,

so there's just a lot of volatility over the near term," said

Kathryn Rooney Vera, chief market strategist at StoneX Group.

Brent crude futures prices added just under 4% to

trade near $76.94 after resuming trading on Sunday, having risen

7% on Friday as Israel and Iran first traded strikes. They later

pared gains to trade up $2.14 at $76.37.

"It is noteworthy that while the Israelis have attacked

Iran's natural gas processing facility, which fuels its power

grid, it hasn't as of now hurt its oil export facilities," said

Eric Beyrich, portfolio manager at Sound Income Strategies. Of

the early market moves, he said "this could all change as the

day unfolds."

Israel's air offensive against Iran that began early on

Friday, killing commanders and scientists and bombing nuclear

sites in a stated bid to stop Tehran from building an atomic

weapon, knocked risky assets including stocks, on Friday. It

also lifted oil prices and prompted a rush into gold and the

dollar, which resumed its role as a safe-haven asset for the

first time in months.

Rallying oil prices pose a risk to the inflation outlook, as

central banks around the world grapple with the impact on prices

from Trump's trade tariffs and the effect on economic growth.

Rooney Vera at StoneX said she was worried about possible

supply restrictions in case of a closure of the Strait of

Hormuz, a narrow shipping lane between Iran and Oman. Any

closure could restrict trade and further impact global oil

prices.

"That could worsen inflationary pressures," she said.

Investors are skittish, and the S&P 500 appears to

have stalled after rallying about 20% from its trade war-induced

April low to near-record highs. Futures opened slightly lower on

Sunday, with S&P 500 futures down 0.2% early in the overnight

session.

"The equity market will breathe somewhat of a sigh of relief

that Iranian military muscle is not at the level that some of us

feared," said Jack Ablin, chief investment officer of Cresset

Capital.

Meanwhile, protests, organised by the "No Kings" coalition to

oppose Trump's policies, and the assassination of a Minnesota

state lawmaker on Saturday, added to downbeat sentiment.

"It's more of an oil story than an equity story at this

point," said Jim Carroll, senior wealth adviser and portfolio

manager at Ballast Rock Private Wealth. "Stocks right now seem

to be hanging on."

The Cboe Volatility Index, often called the Wall

Street "fear index," finished at 20.82 on Friday, its highest

close in three weeks.