Global markets started the week on a down note after the US and Israeli attacks on Iran heightened tensions in the Middle East and spooked investors.
Asian markets started the day generally lower, with major markets in the region trading in negative territory. However, some losses were partially offset by gains in oil and gold mining stocks, particularly in Australia.
We introduce all the notable developments in financial markets as the Middle East conflict unfolds.
Energy stocks soar
Energy prices soared as investors priced in the risk of broader Middle East conflict.
U.S. crude oil prices were up about 8.5% as of 2:27 a.m. ET, trading around $72.81 per barrel. Brent, the global benchmark, surged more than 9% to trade around $79.53.
Oil markets are now focused on the Strait of Hormuz, the world’s most important energy chokepoint.
Although the waterway has not been officially closed, tanker traffic has slowed to a near standstill due to rising war risk insurance premiums and grounded shipping, forcing “an immediate repricing of geopolitical risk rather than a prudent response to fundamentals,” JPMorgan said in a note.
The bank also warned that if the disruption extends beyond three weeks, producers in the Gulf could run out of storage capacity and be forced to halt production, a scenario that could push Brent prices into the $100-$120 range.
In Asia, energy stocks woodside energy and Santos In Australia, it jumped more than 6%, similar to the Tokyo listing. INPEX and Nippon Oilsaw a significant jump of 6.08% and almost 12%, respectively.
Airline stocks continue to be suspended
Airline stocks will be the biggest decliners across the board, with major airlines in Asia expected to suffer losses across the board.
As of 6:30 a.m. Singapore time, more than 50% of flights worldwide to the Middle East had been canceled, according to Circium. The data provider said the figure could be even higher because “some airlines have not updated their schedules to officially cancel flights or are simply not operating flights.”
australian Qantas Airways The Japanese flag carrier fell 5%, even though none of its flights were affected. ANA and Japan Airlines It also recorded losses of more than 5%.
Nihon Keizai Shimbun reported that JAL canceled flights from Tokyo to Doha on Saturday. singapore airlines Taiwan fell by 4.74% EVA Air also fell by 4.47%.
Defense stocks rose slightly
Defense stocks recorded a modest increase. Defense activity in the region was sluggish as the South Korean market was closed for a public holiday.
A stalwart of Japan’s defense Mitsubishi Heavy Industries and IHI It has increased by more than 3%. singapore’s ST Engineering It increased by 4%.
Analysts at Franklin Templeton said Monday they favor energy, shipping, insurance and defense in the near term, but remain cautious about fuel-sensitive cyclical stocks such as airlines.
safe haven
Gold, a classic safe-haven asset, has rallied on the back of rising geopolitical uncertainty and falling bond yields, reinforcing its traditional role as a hedge in times of stress.
Spot gold rose 1.89% and gold futures rose 1.77%. Asian gold miners, mainly concentrated in Australia, also rose more than 4%, including: Northern Star Resources and evolution mining.
“We are clearly seeing a tactical rotation into precious metals, especially in an environment defined by geopolitical stress and currency devaluation concerns,” said Kurt Hemecker, CEO of Gold Token SA.
Bitcoin pared earlier losses and rose 1.5% to around $66,675, but remains well below its October peak of around $126,000.
“While gold’s rally reflects demand for stability and balance sheet protection, the weakness in cryptocurrencies is more due to liquidity tightness and positioning fatigue,” Hemecker said.
On the currency front, the dollar index rose by about 0.61%, and the Swiss franc also rose slightly, gaining 0.1% and trading at 0.7681 francs against the dollar.
But in an unusual move, the yen, Asia’s safe-haven currency, fell on Monday, losing 0.57% against the dollar.
The weaker yen could be explained by Japan’s status as a net oil importer and by the yen losing some of its luster during the recent risk-off period, said Matthew Ryan, head of market strategy at Every, a currency risk management service.
US yields are rising rapidly
The Japanese yen was not the only asset that moved contrary to expectations. U.S. Treasury yields have also risen since the attack, suggesting traders are selling bonds rather than looking for them as a safe haven.
U.S. Treasury yields rose slightly across all maturities relative to the benchmark. 10 year yield It rose by about 0.6 basis points. The yield on the 30-year Treasury note rose 2 basis points.
In Asia, Japanese government bonds fell slightly across all maturities.
“Bond yields could rise in the short term due to concerns about higher inflation,” said Benjamin Jones, head of global research at Invesco.
He said some government bond markets could benefit from demand for safe assets, but inflation concerns were likely to dominate.
“Based on that, and given the energy independence of the United States, we think that U.S. government bonds may be less affected than European government bonds or Japanese government bonds.”
