USD/JPY, XAU/USD React as US-Israel Strike Campaign in Iran Sparks Risk-Off

Markets are bracing for a full geopolitical week as Israeli media reports a large-scale, coordinated US-Israel strike campaign inside Iran, described not as a limited tactical action but as the opening phase of a broader, multi-day military operation. This escalation is expected to trigger significant safe-haven flows, boosting the Japanese yen and Swiss franc against the US dollar while propelling gold prices higher. USD/JPY faces immediate downside pressure as risk-off sentiment drives demand for the yen, with traders watching the 148.00 support zone. XAU/USD is poised to test resistance near recent highs as geopolitical risk premiums surge. Crude oil prices are expected to spike sharply given Iran's role as a major OPEC producer, which could indirectly support commodity-linked currencies like CAD while pressuring oil-importing nations' currencies such as JPY on the trade balance front. The US dollar index may see mixed action, benefiting from safe-haven demand but weighed down by rising uncertainty around economic disruption. Traders should prepare for elevated volatility and widened spreads across major pairs throughout the week.