Financial markets reacted subduedly to Iran's firing of hundreds of missiles and drones toward Israel on Saturday, but oil and stock futures traded nearly flat on Sunday night.
Major US stock indexes rose 0.2-0.3%, while oil prices fell 0.2-0.4%. West Texas Intermediate crude oil remained below $86 per barrel, and Brent crude oil was near $90. Analysts had previously predicted that Brent oil prices, already up 20% since the start of the year before the attacks, could top $100 a barrel.
The price of gold, traditionally considered a safe-haven asset, was flat at $2,375 an ounce, still below its all-time high hit on Friday.
U.S. Treasuries, another safe bet, sold off slightly, with the 10-year yield rising 5.5 basis points to 4.554%. The dollar fell against the euro and the British pound, but rose against the yen.
Cryptocurrencies continued to rebound from Saturday's decline. Bitcoin rose 1.6% to $65,205, and Ether rose 2.5% to $3,150.
The slow initial reaction may be due to optimism that the Middle East conflict will not escalate. This was Iran's first full-scale military attack on Israel, but 99% of the projectiles were shot down and no casualties were reported.
Meanwhile, the White House indicated it was working to prevent the escalation of hostilities. President Joe Biden reportedly told Prime Minister Benjamin Netanyahu that the United States would not take part in any offensive action against Iran, after pledging “resolute” support for Israel's defense.
Meanwhile, the Iranian government has indicated that no further attacks are planned. But Israel's response, as well as further retaliation from Iran, remains to be seen.
Capital Economics said in a note early Sunday that escalating tensions in the Middle East are yet another reason for the U.S. Federal Reserve to delay cutting interest rates, as oil prices could disrupt Middle East banks' fight against inflation. He said it is likely.
“The key risks to the global economy are whether this escalates into broader regional conflict and how energy markets react,” said Neil Shearing, group chief economist at Capital Economics.
However, he added that potential countermeasures include disinflationary pressures from lower export prices due to China's recent capacity expansion, as well as demands from some OPEC+ countries to pump more oil, which could lead to lower oil prices. Ta.
Immediately after the Iran attack, the cryptocurrency's price plummeted on Saturday night, but later recovered some of its losses. Early signs of market turmoil appeared on Friday, when benchmark U.S. crude oil prices rose as much as 3% to more than $87 a barrel on reports of an impending attack by Iran.
U.S. Treasuries also rebounded sharply, with the 10-year Treasury yield dropping as much as 10 basis points as investors sought safety. The U.S. dollar strengthened on Friday as geopolitical tensions drove investors away from riskier emerging market currencies.
The price of gold soared to a new record high of over $2,400 per ounce, and the rally has since reversed. And on Friday, stocks, led by risk-on tech stocks, sold off as investors digested bank earnings and the latest inflation data, further dampening expectations for an impending Fed rate cut.
