(Bloomberg) — The United States and Israel launched coordinated and massive missile strikes against Iran that killed the supreme leader, Ayatollah Ali Khamenei. The attacks targeted the country’s military apparatus and were planned to prevent it from developing a nuclear weapon.
Iran responded with missile strikes against targets across the Middle East. The market impacts, especially for oil, are not yet clear, but some digital assets valued higher amid the turmoil.
Khamenei and the Succession
President Donald Trump stated, in a post on social media, that Khamenei, the second supreme leader of Iran since the founding of the Islamic Republic in 1979, was killed. Trump called Khamenei “one of the most evil people in history” and reiterated his call for the Iranian people to rise up and overthrow the regime.
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Iranian state media initially rejected Trump’s claims, but around 5 a.m. Tehran time, the official television confirmed the death of the supreme leader, saying he was killed in his office complex. Authorities decreed 40 days of national mourning.
Khamenei’s death raises the question of who will govern Iran next, since he had not publicly designated a successor. The Assembly of Experts is the clerical body responsible for selecting the supreme leader.
In the interim, a council composed of the president, the head of the judiciary, and a jurist from the Guardian Council will assume the leadership functions. Ali Larijani, head of Iran’s Supreme National Security Council, said a temporary leadership council would meet on Sunday.
Targets
The United States Central Command (CENTCOM) said the forces attacked command and control facilities of Iran’s Islamic Revolutionary Guard Corps (IRGC), air defense capabilities, missile and drone launch sites, and military air bases. For the first time, the U.S. used low-cost, one-way attack drones in combat, according to CENTCOM’s post on the X platform.
Trump said the bombing of Iran would continue throughout the week. U.S. military authorities said there were no reports of casualties or combat injuries among Americans.
Iranian state television reported on Saturday that 201 people were killed and 747 injured in the attacks, citing the Red Crescent. About 85 people died after a missile struck a girls’ primary school in Hormozgan Province, according to the semi-official Iranian Students’ News Agency (ISNA).
The commander of the Revolutionary Guards, Mohammad Pakpour, and the Defense Minister, Aziz Nasirzadeh, were among the senior officials killed in the attacks.
Widespread Retaliation
Iran launched a wave of missile and drone attacks against American bases and regional allies, including the United Arab Emirates, Qatar, Kuwait, and Saudi Arabia. Authorities adopted a defiant stance, with Larijani promising that Sunday’s attacks would be stronger than those of the previous day. Oman, which had previously been largely spared, was also targeted on Sunday.
Defenses were shooting down missiles and drones over the gleaming skyscrapers and affluent neighborhoods of Dubai, where residents reported hearing more explosions on Sunday. CENTCOM confirmed some “minimal” damage to U.S. facilities. Israel was also targeted.
As a sign of Iran’s growing isolation, Gulf nations are intensifying their criticisms of Iranian attacks. Although the Sunni Arab Gulf states have historically had tense relations with Iran, which is majority Shiite, in recent years countries such as Saudi Arabia and the United Arab Emirates had been seeking to improve relations. The current crisis is likely to represent a setback for these efforts.
Oil
Oil markets are pricing in an “extended escalation cycle,” pushing Brent toward $80 per barrel after the U.S. strikes on Iran, according to Bloomberg Intelligence analysis. OPEC+, in principle, agreed on Sunday to a slightly larger increase in oil production next month, delegates said, as the conflict threatens to push prices higher.
The transport of oil and gas remains largely disrupted in the Strait of Hormuz, while Iran intensifies threats to ships transiting the strait. Mohsen Rezaei, a member of Iran’s Expediency Discernment Council — the body that advises the supreme leader — said on state television that “no American ship is allowed to enter the Persian Gulf.” Earlier, the U.S. had warned vessels to stay away from the Persian Gulf and the Arabian Sea, specifically 30 nautical miles from American military assets.
A small tanker, which appears to be under U.S. sanctions for helping Iran export fuels, was attacked on the northern coast of Oman, though it is not yet clear who was responsible.
Travel Disruptions
Airlines across the Persian Gulf extended suspensions as Iran’s retaliatory attacks enter their second day, causing major disruptions at some of the world’s busiest airports. Emirates, the world’s largest international airline, suspended flights indefinitely, while Etihad Airways extended cancellations until 2 a.m. Monday. Qatar Airways said all flights remain suspended and that it would provide an update at 9 a.m. Monday.
Several Gulf airports were hit by crossfire. Abu Dhabi Airport reported one death and several injuries overnight after the emirate intercepted an Iranian drone. Major airports in Dubai, Bahrain, and Kuwait were also hit.
Impact on Markets
All eyes will be on energy markets when trading fully reopens on Monday, said macro traders, with early signs of volatility also expected as the U.S. dollar and other currencies begin trading in Australia.
The mere fear of military action had already driven oil prices higher last week. Brent rose 2.5%, to $72.48 per barrel on Friday, the highest close since July. Year-to-date, the contract has gained nearly 20%.
Bitcoin, for its part, staged a modest recovery. Prices rose up to 2.2%, to $68,196, after Iran confirmed Khamenei’s death, before retreating to around $66,500 by 6 a.m. in New York.
U.S. Domestic Politics
In an eight-minute video released immediately after the strike, Trump attempted to justify the offensive against Iran, presenting it as necessary to eliminate an adversary that, in his view, spread terror far beyond its borders and killed its own people, most recently in the protests that rocked the country.
He urged the Iranian people to rise up against the theocracy that has governed the country since 1979, saying that the government was “yours to take.” Aside from a few posts on his own social media platform, the president has largely remained off the public stage since the conflict began.
So far, congressional reaction has been split largely along party lines, with some exceptions. Republicans generally express support for the military action, while Democrats are calling for a vote on a resolution that would limit the president’s authority to conduct attacks.
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