Oil prices surged, gold hit a 6.5-year high and most equities tumbled on Monday after the US assassination last week of a top Iranian general added more fuel to Middle East fires, dealers said.
The leaders of Germany, France and Britain have agreed to work towards a de-escalation of Middle East tensions following the US drone strike that killed Qasem Soleimani.
US President Donald Trump has nonetheless warned of a “major retaliation” if Tehran takes revenge for Friday’s killing of the Iranian commander, which triggered a sell-off in stocks and a spike in crude.
Oil extended its gains on Monday and gold shone brightly to briefly touch $1,588.13 per ounce — a level last seen in April 2013 — as investors flocked to the safe-haven precious metal.
It then eased back to $1,574.08 in afternoon European trades.
Asian, European and US stock markets tanked meanwhile, having wobbled before the weekend as news of the assassination flashed across traders’ screens.
– ‘Middle Eastern tensions’ –
“Today’s … losses extend the stock market weakness that began on Friday when a US airstrike killed Iran’s top Military Commander Qasem Soleimani,” said London Capital Group analyst Jasper Lawler.
“The prospect of Iran avenging the killing of Soleimani and then a retaliation from the US is keeping de-escalation hopes at bay.
“We would expect the impact of these Middle Eastern tensions to be more durable in commodities markets than in equities,” he said.
Iran announced on Sunday a further rollback of its commitments to its nuclear accord, while Iraq’s parliament demanded the departure of US troops from the country as fallout from the attack spread.
The crisis has jolted investors who were in an upbeat mood as China and the US prepare to sign their mini trade deal next week, and data indicated a slight improvement in the global economy.
Both main crude oil contracts rallied, with Brent topping $70 for the first time since September when attacks on two Saudi Arabian facilities briefly halved output by the world’s top producer.
After facing criticism for the action and calls to dial down the tension, the US president was in a fighting mood, saying the White House had dozens of sites lined up for strikes in case of retaliation by Iran — adding that he did not need Congressional approval, even for a “disproportionate” hit.
“Geopolitical tensions look like remaining elevated in coming days, so lending support to oil prices and keeping risk asset markets on the defensive,” said Ray Attrill at National Australia Bank.
– Energy firms boosted –
On Wall Street, falls from record highs last week were followed by more losses as trading began on Monday, after all seven bourses in the Gulf Cooperation Council (GCC) states finished sharply lower.
Energy firms rallied meanwhile since higher crude prices tend to lift their profits and revenues.
Inpex jumped more than four percent in Tokyo while in Hong Kong, PetroChina added four percent and CNOOC surged 3.6 percent.
Back in London, BP jumped almost 2.0 percent in value and Royal Dutch Shell ‘A’ shares added 1.1 percent.
– Key figures around 1430 GMT –
West Texas Intermediate: UP 0.98 percent at $63.67 per barrel
Brent Crude: UP 1.2 percent at $69.41
London – FTSE 100: DOWN 0.8 percent at 7,561.23 points
Paris – CAC 40: DOWN 0.9 percent at 5,992.78
Frankfurt – DAX 30: DOWN 1.2 percent at 13,066.08
EURO STOXX 50: DOWN 0.9 percent at 3,740.84
New York – Dow: DOWN 0.5 percent at 28,491.50
Tokyo – Nikkei 225: DOWN 1.9 percent at 23,204.86 (close)
Hong Kong – Hang Seng: DOWN 0.8 percent at 28,226.19 (close)
Shanghai – Composite: FLAT at 3,083.41 (close)
Pound/dollar: UP at $1.3156 from $1.3083 at 2200 GMT
Euro/pound: DOWN at 85.09 pence from 85.31 pence
Euro/dollar: UP at $1.1194 from $1.1161
Dollar/yen: UP at 108.12 from 108.09 yen