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Stocks Fall as U.S.-Iran Tensions Mount Stocks Fall as U.S.-Iran Tensions Mount
(about 1 hour later)
The aftershock of the American killing of a powerful Iranian general rippled through financial markets on Monday, as oil prices surged and investors turned to safe havens like gold and Treasury bonds in the face of rising tensions in the Middle East. The aftershock of the American killing of a powerful Iranian general rippled through financial markets on Monday, as oil prices rose and money moved to the safety of gold and Treasury bonds in the face of rising tensions in the Middle East.
The S&P 500 dropped 0.6 percent in early trading, a second day of declines since the killing of Maj. Gen. Qassim Suleimani. Iran pledged to retaliate for the killing while President Trump raised the specter of additional strikes on Iranian cultural sites if it did so. On Wall Street, stocks slipped in early trading, putting the S&P 500 index on track for its second straight decline. The selling was most notable in shares of companies with significant exposure to fuel costs: Airlines, shipping and logistics firms fell. Oil and energy stocks — which can benefit from higher oil prices — rose.
Brent oil, the international benchmark for crude, briefly jumped above $70. The rise in oil prices — Brent crude is up more than 7 percent in less than a month — set the tone for trading in other markets, with stock markets in oil-reliant nations like India and Japan seeing steeper drops in overnight trading. Japan’s Nikkei dropped 1.9 percent, as did India’s key stock market benchmark, the Sensex.
In Europe, shares also took a tumble. Markets in Frankfurt, London, Paris and Amsterdam were all down about 1 percent.
In the United States, discount retailers Dollar Tree and Dollar General, whose customers tend to have lower disposable income and higher sensitivity to increased gas prices, fell more than 1 percent in early trading.
Yields on Treasury bonds — which move in the opposite direction of prices — fell as investors sought out the relative security of government bonds. The yield on the 10-year Treasury note hovered around 1.77 percent in early trading.
The drop in yield sent share prices of finance companies down. Lenders tend to benefit from higher bond yields, which are the foundation for the rates consumers pay to borrow. The financial sector was the worst-performing part of the S&P 500 in early trading Monday.
Prices for precious metals gold and silver, traditionally viewed as a both a safe haven and a hedge against higher inflation, rose more than 1 percent.
Investors showed nervousness as Iran pledged to retaliate for the killing of Qassim Suleimani, the Iranian general, and President Trump raised the specter of additional strikes on Iranian cultural sites if it did so.
The State Department warned of a “heightened risk” of a missile attack near American military bases. Iran later said it would abandon a nuclear agreement and Iraq vowed to expel American troops from the country.The State Department warned of a “heightened risk” of a missile attack near American military bases. Iran later said it would abandon a nuclear agreement and Iraq vowed to expel American troops from the country.
The sudden escalation in tensions in a region that supplies much of the world’s petroleum has roiled oil markets. The sudden escalation in tensions in a region that supplies much of the world’s petroleum has roiled oil markets. The West Texas Intermediate, the American oil benchmark, rose 1.6 percent to $64.04 a barrel in futures trading.
The price of Brent oil, the international benchmark, jumped above $70 in futures trading before falling back slightly. The price is about 5 percent higher than before the killing last week. But in the United States, investors remained somewhat indifferent to the growing conflict between the United States and Iran. Stocks are coming off one of the best years of recent decades. In 2019, the S&P 500 rose 28.9 percent.
West Texas Intermediate, the American oil benchmark, rose 1.6 percent to $64.04 a barrel in futures trading. Even after two consecutive days of declines, the market remains less than 1 percent below the record highs it hit on Jan. 2.
Analysts at Capital Economics have warned that the price of oil could spike to $150 a barrel if the bellicose rhetoric between the two countries turned into action.
“The price of oil would soar in the event of full-blown military conflict in the Middle East,” said Alexander Kozul-Wright, a commodities economist at Capital Economics.
“However,” he added, “this rally would probably be short-lived as supply networks would adjust and demand would slump in the wake of higher prices.”
The price of gold, considered a safe haven investment, reached its highest level since April 2013. The spot price of bullion hit $1,588.13 an ounce, up more than 2 percent, in early trading before coming down slightly.
Stocks also fell in financial capitals across Asia and Europe. In Tokyo, shares fell by 2 percent, while major stock markets in Hong Kong, Taipei and Seoul inched down about 1 percent or more.
Markets in Frankfurt, London, Paris and Amsterdam were all down about 1 percent.