Markets Unsettled After Latest Iran Attack
Global markets were searching for direction on Wednesday after Iran launched several missile attacks on American forces in Iraq. The attacks came after the funeral of General Qassem Soleimani, who was killed by U.S. forces over the weekend. The hit on Soleimani sparked concerns that there would be an escalation of violence in the Middle East, but recent days of calm kept fears at bay and markets stable. The attacks by Iran on Wednesday called into question whether the façade of calm was naïve, and whether additional fighting will be forthcoming.
Oil prices traded lower on Tuesday, but were sharply higher on Wednesday on concerns that the Iranian attacks would disrupt production. U.S. WTI futures were up 0.88 percent as of 2:43 p.m. HK/SIN to $63.23 per barrel, and Brent crude futures soared 1.11 percent to $69.03 per barrel. Brent prices had touched above $70 per barrel in the immediate aftermath of the strikes, touching its highest level since mid-September before retreating.
Gold trading also saw increased volatility on Wednesday after the precious metal traded briefly above the $1,600 per ounce level before retreating. Gold futures were priced at $1,595.50 per ounce in the mid afternoon in Asia, a gain of 1.35 percent.
At the moment it remains unclear whether the tensions between the U.S. and Iran will escalate further or whether U.S. President Donald Trump will guide his troops to stand down. It does not appear that there were any U.S. casualties following the latest strikes by Iran, an outcome which may keep tensions from escalating. However, President Trump has promised to stay apprised of the situation and to make a statement on Wednesday morning that could have a swift impact on the fighting and the markets. Until then, Trump has remained publicly positive, tweeting that “All is well!” on the Iran front.
Iranian Foreign Minister Mohammad Javad Zarif also took to Twitter, claiming that “we do not seek escalation or war, but we will defend ourselves against any aggression.” He added that Iran’s strikes were in proportion to the moves by the U.S. and legal according to Article 51 of the UN Charter.
All three major U.S. benchmarks closed lower on Tuesday, and futures slumped overnight pointing to a lower open on Wednesday. In Asia, indexes were trading broadly lower, with Japan’s Nikkei 225 leading the losses after shedding 1.57 percent by the mid-afternoon. South Korea’s Kospi eased 1.11 percent and Hong Kong’s Hang Seng Index was down 1.16 percent. The Shanghai Composite was 1.15 percent lower and the Shenzhen Composite was down 1.101 percent.