Global markets kicked off the first trading day of the week under the shadow of escalating tensions between the US and Iran. Following mutual attacks over the weekend, the parties' agreement on a ceasefire and a decision to resume negotiations on the Strait of Hormuz led to cautious and two-way movements in asset prices.
Oil prices rise on risk premium
Iran's missile and drone attacks on American military posts in Bahrain and Kuwait over the weekend exposed the fragility of the interim agreement between Washington and Tehran. The attacks came shortly after US President Donald Trump issued harsh threats targeting the Iranian leadership. An American official said the parties had agreed to halt the latest wave of clashes and restart the Strait of Hormuz talks.
In response to these developments, the price of Brent crude rose more than 1 percent to $72.94 per barrel, while US crude traded around $70.44. Prices remained above Friday's closing levels of $71.99 for Brent and $69.23 for US crude. Achilleas Georgolopoulos, an analyst at XM brokerage, said the war-related risk premium could persist until the situation in the Middle East fully calms down.
Strait of Hormuz shipments recovering
The Strait of Hormuz, the heart of global energy markets, is showing surprising signs of recovery despite the 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 nearly four months. These operations continued despite a company helicopter crash on Sunday at Ras Tanura that killed 14 people due to an as-yet unknown cause.
According to ING analysts, although the market still faces significant 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 upward risks for prices alive. Brent crude had lost 10.6 percent last week, suffering its third consecutive weekly decline.
Safe haven gold under interest rate pressure
Despite rising geopolitical tensions, spot gold came under pressure due to investor expectations that the US Federal Reserve may raise interest rates. Concerns that rising oil prices would fuel inflation and force the Fed into tighter monetary policy led to a sell-off in the non-yielding metal.
Gold spot prices fell about 0.9 percent during the day to $4,013 per ounce, heading for a fourth consecutive monthly loss. Tim Waterer, chief market analyst at KCM Trade, said the renewed US-Iran clashes have increased uncertainty about whether the decline in oil prices will continue and about forecasts for inflation and interest rates. Among other precious metals, silver fell to $57.72, platinum to $1,563, and palladium to $1,196.
Tech stocks rebound on Wall Street
New York stock markets started the week with cautious optimism. The halt of the exchange of attacks between the US and Iran and the signal of a return to diplomacy boosted investor morale. The Dow Jones Industrial Average rose 324 points (0.6 percent), while the S&P 500 also gained 0.6 percent, approaching the 7,400-point mark. The tech-heavy Nasdaq Composite Index, supported by a recovery in technology stocks after the previous week's losses, gained about 1 percent.
The Nasdaq and S&P 500 had recorded five consecutive days of declines last week. The market rally was supported by signs that negotiations between Washington and Tehran have not completely collapsed despite the attacks.
