Asian traders woke to a nervous open on Friday after oil surged and Wall Street futures sank following reports that Israel had carried out a military strike against Iran. The unexpected turn sent investors fleeing to the safety of gold and the Swiss franc, and pulling money from stocks.
Only last week, the Asian markets had appeared strong. The Hang Seng in Hong Kong and the KOSPI in South Korea both rose by nearly 1%, and Japan’s Nikkei inched up as well. That momentum, fueled by diminished trade tensions, came to an unexpected halt. This jarring reversal underscores how quickly market sentiment can shift.
Oil prices surged — Brent was up nearly 9 percent, to $75.36 a barrel, and West Texas Intermediate rose to $74.20. Meanwhile, gold climbed 1.5%, edging closer to a record high of around $3,434 per ounce. There was strong, broad-based safe-haven buying.
Futures for Wall Street fell overnight. S&P E-mini futures fell 1.7 percent, while Nasdaq futures fell 1.8 percent. In Europe, the STOXX 50 futures were down 1.6%, showing signs of a global risk-off mood.
Asian stock markets quickly felt the heat. Japan’s Nikkei was down 1.3 percent, South Korea’s KOSPI fell 1.1 percent and Hong Kong’s Hang Seng fell 0.8 percent. Traders attributed the increased risk to regional tensions.
The geopolitical blow-up further raises the stakes at a time when the mood of the market is already fragile,” said Charu Chanana, Chief Investment Strategist at Saxo. “Oil and safe havens will remain bid until we see a de-escalation in tensions.”
Equities around the world looked shaky. The MSCI All-Country World index had recently set a record high after a steady upward march since early April. But many analysts have thought pullbacks were inevitable and the current crisis could set off a deeper sell-off.
The rally “had room to run out of steam,” said MooMoo strategist Jessica Amir, and growing Middle East tensions could prove to be the catalyst.
Israel has declared a state of emergency after its pre-emptive strike, according to reports. Iran announced the death of Revolutionary Guards Commander Hossein Salami. Israeli officials also said senior military and nuclear officials had been hit. Now tensions are arguably at their worst in recent memory.
There are also global politics at play in this war. U.S. Secretary of State Marco Rubio stressed that what Israel had done was “unilateral” and that the U.S. was not officially involved in the move. Iranian and American officials will sit down in Oman this weekend for a sixth round of talks over Iran’s uranium enrichment program.
In fixed-income markets, U.S. Treasury bonds rose. Investors dumped riskier assets and sent 10-year note yields to a one-month low of 4.31%. Haven currencies also rose: The Swiss franc gained 0.4 percent to 0.8072 per dollar, and the yen strengthened 0.3 percent to 143.12.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.5% to 98.131 as some other traders also sought the security of the dollar. The euro was 0.4 percent weaker at $1.1538 as it came down from its recent highs. The pound was 0.5 percent lower at $1.3554, pulling back from a high on the day.
