As expected, tensions in the Middle East have ratcheted up over the weekend following the US assassination of a top Iranian general Friday. Iraq has asked the US to withdraw its troops from the country because the assassination happened on Iraqi territory while Iran pulled out of the international nuclear deal, prompting President Trump to respond with threats against both countries. The President’s harsh rhetoric has caused some resistance at home as House Speaker Nancy Pelosi said the House of Representatives would vote this week to curb Trump's military powers.
The FTSE, European stocks and US stock futures are showing a sea of red this morning. In London stocks with exposure to the Middle East and the high oil price such as Abu Dhabi-based NMC Health, airlines IAG (LON:ICAG) and easyJet (LON:EZJ) ended up the worst hit. The FTSE gainers were also obvious given the high oil price and rising geopolitical tensions: BP (LON:BP), Shell (LON:RDSa) and military equipment maker BAE Systems (LON:BAES).
Safe haven asset volumes rise through the roof
The crisis is channeling investors towards safe-haven assets such as the yen and gold, with gold hitting the highest level in seven years and volumes nearly doubling from most trading days in December.
Brent crude futures continued to nudge at the $70 mark but for the moment that level seems to be holding, at least until the next Middle East news. However, Brent crude trading volumes have risen through the roof since the Middle East tensions escalated last week, with trade on Friday doubling from the previous days and Monday is likely to see a similarly high level of activity.