Global equity markets are weak today after Iran hit US military bases in Iraq. The Shanghai Composite and the Hang Seng fell 1.2% and 0.83%, respectively. European markets are also looking weak amid US-Iran tensions. Gold and oil prices have risen, while bond yields have tumbled as investors rush to safety. Let’s explore how different asset classes reacted to Iran’s strikes and what the flare-up means for different assets.
Global stock markets
The escalation in US-Iran tensions spooked investors today. Iran has targeted US military bases in Iraq, a few days after US-led drone strikes killed Iranian general Qassem Soleimani in Iraq. Prior to the US strikes, a US contractor was killed in Kirkuk. US-Iran tensions have escalated over the last couple of weeks amid tit-for-tat military strikes, and risk assets came under pressure today amid rising geopolitical tensions. Investors found solace in risk-free assets, and gold and bond prices rose. Oil prices also increased as they typically do in periods of unrest in the Middle East.
Shanghai Index and Hang Seng fall
The Shanghai Index and the Hang Seng fell 1.2% and 0.83%, respectively, today. The Hang Seng underperformed global markets last year during the Hong Kong protests. India’s benchmark NIFTY 50 index fell 0.23%, while Japan’s Nikkei 225 tumbled 1.6%. India’s equity markets outperformed some Asian markets, which is surprising considering that the country relies heavily on oil imports. It runs massive trade and fiscal deficits, making it more vulnerable to an oil price shock than other Asian economies. Meanwhile, the leading indexes in Europe—the FTSE 100, CAC 40, and DAX—are looking weak and trading mostly sideways. However, they haven’t weakened as much as Asian markets.
While global stock markets are trading on a negative note today, gold and oil have shined. Spot gold prices have surpassed $1,600 today. Although gold has pared some gains, it is still trading higher for the day. Oil also rose following Iran’s strikes on US military bases, but has pared its gains. At 7:00 AM ET, active gold and active WTI futures were up 0.22% each. For more on the commodities’ fundamentals, read Gold or Crude Oil: Where to Hide amid US-Iran Tensions?
Copper, which also reacts to geopolitical developments, was in the green after the initial jolt. While global markets and asset prices reacted sharply to the news, things soon calmed. Trump’s “All is well!” tweet may have calmed nerves.
Dow futures weak amid global market rout
Although global equity markets reacted negatively to Iran’s strike on US military assets, the mood isn’t bleak—markets expect calm to prevail. Meanwhile, the Dow Jones (NYSEARCA:DIA) and S&P 500 futures (NYSEARCA:SPY) point to a weak opening today. US stock markets closed in the red yesterday. The Dow Jones fell 0.42%, the most among broader market indexes. For more insights, read Could Iran Tensions Impact US Stock Market Investors?