Oil prices jump, stocks sink on fear of US-Iran war

Agence France-Presse

Posted at Jan 06 2020 09:45 PM

LONDON - Oil prices jumped, gold hit a 6.5-year high and most equities tumbled Monday after the US assassination last week of a top Iranian general continued to fuel fears of a major conflict in the Middle East, dealers said.

The leaders of Germany, France and Britain have agreed to work towards bringing about de-escalation in the Middle East amid heightened tensions following the US drone strike that killed Qasem Soleimani.

US President Donald Trump has however warned of a "major retaliation" against Tehran after it threatened revenge for Friday's killing of the Iranian commander, which sparked a sell-off in stocks and a spike in crude.

Oil extended those gains on Monday and gold shone brightly to touch $1,588.13 per ounce -- a level last seen in April 2013 -- as investors flocked to the safe-haven precious metal.

Asian and European stock markets meanwhile continued to tank, having wobbled before the weekend as the assassination news flashed across traders' screens.

"Today's ... losses extend the stock market weakness that began on Friday when a US airstrike killed Iran's top Military Commander Qasem Soleimani," said London Capital Group analyst Jasper Lawler.

"The prospect of Iran avenging the killing of Soleimani and then a retaliation from the US is keeping de-escalation hopes at bay.

"We would expect the impact of these Middle Eastern tensions to be more durable in commodities markets than in equities."

Iran announced on Sunday a further rollback of its commitments to its nuclear accord, while Iraq's parliament demanded the departure of US troops from the country as fallout from the attack spread.

The crisis has jolted investors, who had been in an upbeat mood as China and the US prepare to sign their mini trade deal next week, while data indicates a slight improvement in the global economy.

Both main crude contracts rallied, with Brent topping $70 for the first time since September when attacks on two Saudi Arabian facilities briefly halved output by the world's top producer.

While facing criticism for the action and calls to dial down the tension, the US president was in a combative mood, saying the White House had dozens of sites lined up for strikes in case of retaliation by Iran -- adding that he did not need Congressional approval, even for a "disproportionate" hit.

"Geopolitical tensions look like remaining elevated in coming days, so lending support to oil prices and keeping risk asset markets on the defensive," said Ray Attrill at National Australia Bank.

Haven assets popular in times of turmoil were also on the rise, with the Japanese yen also at a three-month high against the dollar.

Equity markets tracked losses on Wall Street, where the three main indexes fell from record highs Friday, while all seven bourses in the Gulf Cooperation Council (GCC) states finished sharply down, with some fearing Iranian revenge attacks on US assets or troops.

Some of the GCC members, including Kuwait, Qatar and Bahrain, are home to major US military bases, while there are also hundreds of troops in Saudi Arabia.

While markets were broadly lower, energy firms rallied on the back of higher crude prices which tend to lift their profits and revenues.

Inpex jumped more than four percent in Tokyo while in Hong Kong, PetroChina added four percent and CNOOC surged 3.6 percent.

Back in London, BP jumped 1.7 percent in value and Royal Dutch Shell 'A' shares added 1.1 percent.