Financial markets may be in for a "knee-jerk" selloff if the U.S. military attacks Iran, with economists warning that a dramatic rise in oil prices could damage a global economy already strained by President Donald Trump's tariffs.

Investors are regaining some appetite for risk amid rising optimism that the conflict won't spill over into a broader regional crisis.

Stocks rose and oil prices retreated on Monday as investors shrugged off the continuation of hostilities between Israel and Iran over the weekend.