The tensions between the United States and Iran just reached a new level, following Tehran’s attack on American forces in Iraq. And as expected, this also scared investors, who ended up selling shares for gold, considered a safe-haven investment.
On Wednesday morning, following an early surge caused by concerns that global oil supplies can be disrupted, following Iran’s airstrike, oil prices slightly calmed down. Still, the prospect of a potential regional conflagration, able to disrupt all oil supplies, exists.
The power of a tweet
Nevertheless, stocks remained down but some of the early losses were erased, following a series of tweets from Donald Trump and Iran’s foreign minister, which appeared to hint at a period of calm, at least for the moment.
On the other side, Brent crude futures were up 97 cents – the equivalent of 1.4 percent – reaching $69.24 around 04:03 GMT, after initially reaching $71.75, the highest point since mid-September, last year.
As for West Texas Intermediate crude futures, it climbed with 82 cents – 1.3 percent – reaching $63.52 per barrel. Earlier, it was at $65.85, the highest point since April 2019.
“What we have seen is a very limited air strike ok bases in Iraq and that has been somewhat a relief to the markets,” revealed Abid Ali, economics editor for Al Jazeera.
“Initially we saw the markets fall by 2.2 percent in Japan, but that has recovered. We expected US markets to open lower by possibly about 1.7 percent but futures have pared back. And all of this is because of President Trump’s latest tweet, that ‘all is well’ – which has sort of calmed things down,” he added.
Gold, the main focus
The price of gold wasn’t ignored either as it initially went past $1,600 per ounce, while later it pared gains and reached $1,593.56 per ounce, as more investors were looking forward to safe investments.
Finally, we should also mention the sell-off in riskier assets, including stocks, which was accompanied by steep drops in US Treasury yields, as a lot of investors weren’t willing to risk and opted for safe bets.
“If you see US treasuries rallying a bit this morning, expect them to rally quite a bit further should there be a forceful response from the US, which I’d imagine there would be…from a market perspective I think this one could run and run,” said Rob Carnell, ING Singapore’s Asia-Pacific chief economist.
The US dollar and the euro registered changes as well, with the first plunging against the yen, while the European currency gained 0.1 percent, reaching $1.1161.