A new decade, a new conflict. The post-holiday market daze was shattered Friday after the U.S. used a targeted airstrike to kill a top Iranian military leader, the head of the Iranian Revolutionary Guards’ overseas forces Qassem Soleimani. The conflict between the U.S. and Iran which has simmered throughout last year and has resulted in tanker seizures and the blowing up of top Saudi Arabian refining facilities is now on course for a new escalation as Tehran has already promised harsh retaliation.
Oil prices shot up in the wake of the move as did other safe haven assets such as bonds and gold. Brent crude jumped up over 4% and broke above the $69 line before it ran into the first slew of light selling while gold has moved up in a smooth line to $1,551.
Airlines hardest hit
European stocks plunged across the board with the DAX taking the worst damage, falling 1.83%. In London, airlines were hit the hardest because of the spike in oil prices but the FTSE’s decline was somewhat tempered by stronger oil stocks and a rally in British American Tobacco (LON:BATS) shares.
Iran headlines completely overshadowed news that China has broken off the London-Shanghai stock trading link because of tensions in Hong Kong. In the current environment where oil, gold and share prices are all responding fast to the Middle East news it may take a while before markets fully digest the fact that the business ties with China, which the UK has worked so hard to build up over the last decade but particularly since the Brexit decision, could now be called into question, leaving the UK hanging at a time when it needs trade deals more than ever.