Global markets started the first trading day of the week under the shadow of renewed tension between the US and Iran. After the mutual attacks over the weekend, the parties' agreement on a ceasefire and the decision to return to negotiations on the Strait of Hormuz led to a two-way and cautious movement in asset prices.
Oil price risk premium rises
Iran's missile and drone attacks on American military posts in Bahrain and Kuwait over the weekend highlighted the fragility of the interim agreement between Washington and Tehran. The attacks came shortly after President Donald Trump's harsh threats targeting the Iranian leadership. An American official said that the parties had agreed to stop the latest wave of clashes and restart the Strait of Hormuz talks.
Brent crude rose more than 1% to $72.94 per barrel, while US crude traded around $70.44, staying above Friday's closing levels of $71.99 for Brent and $69.23 for US crude. Achilleas Georgolopoulos, an analyst at XM brokerage, said that as long as the Middle East situation does not completely calm down, the war-related risk premium may persist.
Strait of Hormuz shipments recover
The Strait of Hormuz, the heart of global energy markets, is showing signs of a surprising recovery despite military tension. Saudi Arabia's state oil company Aramco resumed crude oil loading operations at the Ras Tanura terminal west of the strait on Friday after a hiatus of about four months. These operations continued despite a company helicopter crash on Sunday that killed 14 people, the cause of which is still unknown.
According to ING analysts, although the market still faces major risks, investors are currently focused on what the recovery in oil flows means for the global supply-demand balance. It is assessed that a slow recovery in supply could keep upside risks on prices alive. Brent crude lost 10.6% last week, posting its third consecutive weekly loss.
Safe-haven gold under interest rate pressure
Despite rising geopolitical tension, spot gold came under pressure as investors expected the US Federal Reserve (Fed) to raise interest rates. Concerns that rising oil prices would fuel inflation and force the Fed into tighter monetary policy led to an exit from gold, which yields no return.
The spot price of gold fell about 0.9% during the day to $4,013, heading for its fourth consecutive monthly loss. KCM Trade chief market analyst Tim Waterer said that the resumption of US-Iran conflicts has increased uncertainty about whether the decline in oil prices will continue and about inflation and interest rate forecasts. Among other precious metals, silver fell to $57.72, platinum to $1,563, and palladium to $1,196.
Technology stocks rebound on Wall Street
The New York Stock Exchange started the week with cautious optimism. The halt of the wave of attacks between the US and Iran and the signal of a return to diplomacy improved investor sentiment. The Dow Jones Industrial Average rose 324 points (0.6%), while the S&P 500 also rose 0.6%, approaching the 7,400-point level. The tech-heavy Nasdaq Composite gained about 1%, supported by a recovery in technology stocks after the previous week's losses.
Last week, the Nasdaq and S&P 500 recorded declines for five consecutive sessions. The market's rise was supported by signs that the negotiations between Washington and Tehran had not completely collapsed despite the attacks.
