World markets on edge as US-Iran tensions spark escalation fears

New York – World markets were mixed after a tense trading day on Monday, with US equities ending higher and bucking a downward trend in Europe and Asia after the US killing of a top Iranian general Friday.

Since he ordered a drone strike that killed Qasem Soleimani, US President Donald Trump has warned of a “major retaliation” if Tehran takes revenge, triggering a sell-off in stocks and a spike in crude prices.

“The new year has started with a bang in so far as volatility is concerned,” said Fawad Razaqzada at Forex.com. 

“This is mainly due to the escalation of tensions between the US and Iran after Trump ordered the assassination of Iranian military commander Qasem Soleimani.”

Gold shone brightly to briefly touch $1,588.13 per ounce – a level last seen in April 2013 – as investors flocked to the safe-haven precious metal, but then eased back.

European stock markets were all weaker at the close, while Wall Street flipped into positive territory late in the day.

Analysts said equities were hammered less severely than some had feared, mostly because the Middle Eastern standoff is expected to have only a limited impact on global growth.

But even the rally in oil appeared to run out of steam in late Europe, with both key petroleum contracts showing only modest gains.

“Almost certainly there is going to be more tensions, Iran will retaliate,” LBBW’s Karl Haeling said.

“But the bottom line is that markets are voting that this is not going to be a disruption to the economy and corporate profits.”

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 in Baghdad spread.

The crisis has jolted investors who were in an upbeat mood, with China and the US expected to sign their mini-trade deal next week and data indicated a slight improvement in the global economy.

Energy firms rallied meanwhile since higher crude prices 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.

In London BP jumped over two percent and Royal Dutch Shell ‘A’ shares added about one percent.