(Bloomberg) -- Oil’s ripple effect into equities and currencies may be more limited than the dramatic commodity surge suggests, according to strategists.
The strike, which removed about 5% of global energy supplies, sent oil prices soaring. Brent crude had its biggest advance in dollar terms since futures started trading in 1988 and topped $71 a barrel. President Donald Trump authorized the release of oil from the U.S. emergency oil reserves. Gold rose about 1%, while S&P 500 futures fell as much as 0.7%. The Norwegian krone and Canadian dollar, both from energy-producing nations, were the best performers among Group-of-10 currencies.
Read about oil jumping the most ever after an attack cuts Saudi supplies.
While the attack roiled energy markets, multi-asset investors should look at the bigger picture as there might be opportunities to take advantage, strategists said.
Any initial selling in equities “is likely a buy,” said Kay Van-Petersen, global macro strategist at Saxo Capital Markets Pte in Singapore. “Generally speaking there is a positive correlation over time between oil and U.S. equities. Energy is still likely to stay bid if there is some kind of response from Saudi Arabia and allies. It’s worth noting that the situation is also very dynamic and no doubt they are working 24-7 to repair the damage.”
The incident adds to an already busy week for markets, with policy decisions from the Federal Reserve, Bank of Japan and more as well as Brexit discussions and the open of the United Nations General Assembly regular session.
“This could create a little churn here ahead of the Fed,“ said Tony Dwyer, equity strategist at Canaccord Genuity LLC in New York. “Clearly oil is breaking out, but if there were a true fear there it seems like the equity futures would be down more than one-third of a percent.”
Stephen Innes, Asia-Pacific market strategist at AxiTrader, agreed.
“Investors will turn to bargain-hunting as trade-war winds blow fair and of course with the prospects of Fed easing and all the other central banks leaning dovish,” he said.
A Possible ‘One-Off’
Brian Barish, chief investment officer at Cambiar Investors LLC in Denver, recommended remaining calm.
“Based on what I know, this is a short-term one-off event; I certainly would not run out and make any major decisions based on this,” Barish said. “The energy market remains generally oversupplied so it’s short-term relief but I don’t see this changing the larger picture.”
There might be opportunities in the currency market, with energy-producing nations faring better and importers having a worse time.
“We should see buying in the Russian ruble as the day rolls on,” said Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne. “This is obviously not a good day if you are an oil importer.”
The traditional havens such as gold may present opportunity as well.
“Gold may have just gotten a key catalyst that will allow it to resume its bullish march toward $1,600 an ounce,” said Ed Moya, senior market analyst at Oanda Corp.
