Israel-Iran war in second week as Donald Trump sends mixed signals

Tel Aviv/Tehran/Washington, June 21, 2025 — The Israel-Iran conflict has entered its second week with no clear path toward de-escalation, as former U.S. President Donald Trump delivers contradictory messages that leave policymakers, markets, and allies scrambling for clarity. As the military confrontation intensifies, the international community is on edge, with ripple effects felt across energy markets, defense stocks, and diplomatic corridors.

Intensifying Conflict, Rising Toll

What began as a targeted missile exchange has now evolved into sustained aerial and cyber warfare. Israel has intensified strikes on suspected IRGC (Islamic Revolutionary Guard Corps) infrastructure across Syria and western Iran. Iran, in response, has launched drone swarms and ballistic missiles into northern Israel, while activating its regional proxies in Lebanon, Iraq, and Gaza.

According to Israeli defense sources, over 120 IDF personnel and civilians have been killed, while Iranian state media reports over 300 casualties on its side, though independent verification remains difficult.

"This war is no longer just a border skirmish or proxy clash — it’s a full-scale regional conflict with global implications," said Yael Dagan, Senior Fellow at the Herzliya Security Forum. "We are witnessing a war of attrition, with both sides testing the red lines of the other and the patience of the international community."

Trump’s Shifting Rhetoric Raises Eyebrows

Amid the crisis, former President Donald Trump, widely seen as a leading contender in the upcoming 2026 elections, has vacillated between support for Israel and calls for restraint. On June 15, Trump declared that Israel “must finish the job,” sparking fears of escalation. Just days later, he criticized Prime Minister Benjamin Netanyahu for failing to avoid the conflict, stating, “This war could have been prevented.”

His statements have created uncertainty within Republican ranks and among NATO allies. Analysts warn that Trump’s mixed messaging could undercut Washington’s efforts to stabilize the region, especially as the Biden administration walks a tightrope to avoid direct U.S. military involvement.

“Trump’s remarks are sending confusing signals not only to Americans but also to allies in the Middle East and Europe,” said Dr. Nour Hadidi, a geopolitical analyst at Chatham House. “His unpredictability makes diplomatic backchanneling more difficult, especially when every word is scrutinized by Tehran and Tel Aviv.”

Energy Markets Surge, Global Supply Chains Strain

The ongoing conflict has sent crude oil prices surging past $101 per barrel for the first time since late 2022. Brent crude rose by nearly 8% over the past five trading sessions, while natural gas prices in Europe jumped 11% amid concerns of disrupted shipping through the Strait of Hormuz.

"Investors are pricing in the risk of a prolonged supply shock," noted Marco DeLuca, Head of Commodities at Avanti Capital. "If Iran targets oil infrastructure in the Gulf or closes the Strait, we could see crude at $120-plus. That would reignite inflation fears worldwide."

Gold has breached the $2,400/oz level, attracting safe-haven flows, while global equity indices remain volatile. The MSCI Emerging Markets Index fell 2.3% this week, while the S&P 500 saw its worst single-day drop in over a month on Wednesday, as risk aversion grew.

Defense and Cybersecurity Stocks Rally

As conflict escalates, defense contractors and cybersecurity firms are witnessing a sharp uptick in investor interest. Lockheed Martin, Northrop Grumman, and Rafael Advanced Defense Systems have each seen gains of 6–12% over the past week. Similarly, shares of CrowdStrike and Palo Alto Networks rose amid fears of a broader cyberwar front.

“Wars always bring a reallocation of capital,” said Neha Rao, Senior Portfolio Strategist at Axis Global Advisors. “Investors are flocking to stocks that benefit from heightened defense spending and technological protection as state-sponsored cyberattacks surge.”

The Tel Aviv Stock Exchange has been particularly volatile, with the TA-35 Index down 4.6% since the outbreak but showing resilience in defense-heavy segments.

Diplomatic Efforts and Global Response

While Washington and Brussels continue to call for a ceasefire, backchannel diplomacy via Qatar and Switzerland has yielded no significant breakthroughs. China and Russia, while nominally neutral, have warned against what they term “Western militarization” of the region. The United Nations Security Council has scheduled an emergency session for June 23, but expectations remain low for consensus due to veto dynamics.

The U.S. has dispatched additional naval assets to the Eastern Mediterranean and bolstered air defense systems in Iraq and Saudi Arabia, signaling preparedness but avoiding direct confrontation.

Investor Outlook: Caution, Hedging, and Sectoral Rotation

Financial advisors are urging clients to stay defensive in the near term. “There’s too much uncertainty,” said Anthony Becker, CIO of Newton Financial. “We’re telling clients to hedge positions, increase allocation to commodities, and reduce exposure to emerging markets.”

In contrast, some contrarian investors are exploring opportunities in undervalued Israeli tech stocks and Middle East ETFs, betting on a post-war recovery. However, most are playing it safe, awaiting more definitive signals from both military and diplomatic fronts.

“We're at a pivotal moment,” said Dr. Leila Nazari, Middle East fellow at Brookings Institution. “This isn’t just about Israel and Iran. It's about the risk of cascading instability across the region — and how the world chooses to respond.”

As the second week closes with sirens still blaring in Tel Aviv and Tehran, the fog of war grows thicker. The world watches not just for signs of peace — but for any coherent message that could shift the tide.