Oil surges and global stocks sink on fears Trump's Iran strike will be 'deemed a declaration of war'

Screenshot 2020 01 03 at 08.55.28

Markets Insider


A US strike on a top military leader in Iran ignited fears of spiraling military conflict, leading oil to surge about 4%.

A New Year market rally was abruptly halted by the sudden risk-off sentiment.

The airstrike killed Iran's elite Quds force commander, Maj. Gen. Qassem Soleimani, the US confirmed on Thursday night.

"To many in the Middle East, this may be deemed a declaration of war," said Helal Miah, investment research analyst at The Share Centre.

"A rise in oil prices ... is just what the global economy needs to avoid at this time where growth is fragile."

Here's where markets are trading at about 9:40 a.m. in London (4:40 a.m. in New York):

  • West Texas Intermediate and Brent crude each rallied at least 4% on the news, before paring those gains early London time. WTI was up about 3.4% to $63.27 a barrel, while Brent gained 3.5% to about $68.53.
  • US futures underlying the S&P 500, Dow and Nasdaq are down more than 1% each.
  • Europe's benchmark Euro Stoxx 50 is down about 0.8%. Germany's Dax slumped about 1.2%. France's CAC 40 Index fell 0.5%.
  • In Asia, the Nikkei and Hang Seng fell at least 0.3%. The Shanghai Composite Index was down 0.1%.
  • Gold jumped 1.4% to about $1,549.

"A severe retaliation awaits murderers who have the blood of Soleimani and that of other martyrs on their wicked hands from last night's incident," said Supreme Leader Ayatollah Ali Khamenei, according to a statement cited by Bloomberg.

"It's never likely to be good news for the markets when 'World War III' is trending on Twitter," said AJ Bell investment director Russ Mould. "It is therefore hardly a surprise to see yesterday's positive start to 2020 for stocks come to an abrupt end."

The US move "promises to escalate tensions in the Middle East and it is unsurprising to see crude oil prices trade higher to factor in potential disruption to supply from the region," he said.

"Turbulence often sees investors reaching for the safety belt of gold exposure."

Read more: Iran's Supreme Leader: 'Harsh retaliation is waiting' for the US after Trump-directed airstrike on top general

Get the latest Gold price here.

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