Havens Rally After Iran Strike – Nasdaq Drops 1.5%
Investors shifted to a defensive stance in trading yesterday after Iran launched over 200 missile strikes at Israel. Stock markets retreated from recent highs, while haven trades surged. All three major US indices posted losses, with the Dow falling by 0.41%, the S&P 500 down by 0.93%, and the Nasdaq leading the declines, closing 1.52% lower. US Treasury yields also fell, with the 2-year dropping 3.4 basis points to 3.617%, and the 10-year shedding 6.3 basis points to reach 3.739%. The US dollar rallied strongly due to its safe-haven status, with the DXY index climbing 0.45%, pushing major currencies back into their recent ranges. Oil prices surged by nearly 5% at one point but later pulled back, with Brent finishing 2.6% higher at $73.56 and WTI gaining 2.4% to close at $69.83. Gold rallied, once again approaching record levels, rising 1.06% to close at $2,662.83.
Geo-Political Risks to Rise in Q4
Investors have long been concerned about rising geopolitical risks in the final quarter of what has otherwise been a stellar trading year, and yesterday’s escalation of military action in the Middle East has only amplified those fears. Alongside the conflict in the Middle East, the ongoing war in Ukraine still has the potential to expand, which could significantly impact global markets. In Japan, the surprise election of Shigeru Ishiba as Prime Minister has contributed to heightened volatility in the yen in recent days. Additionally, the upcoming US Presidential election is poised to have the most far-reaching effect on global markets. Against this backdrop, many market participants are adopting defensive strategies, preparing to act should volatility and global risks escalate further.
Middle East Tensions in Focus for Traders Today
Traders will continue to closely monitor news developments today, following the market-moving missile strikes on Israel by Iran. The Asian session sees little on the macroeconomic calendar, with Chinese markets still closed for Golden Week, resulting in lower overall liquidity. The European session is similarly quiet, though OPEC+ meetings begin today, and in light of yesterday’s geopolitical updates, traders across various markets will be keeping a close watch on any developments. The US session, however, brings more key data, including the ADP Non-Farm Employment Change figures, which often serve as a precursor to Friday’s crucial Non-Farm Payrolls report. Additionally, US oil inventory data will be released later in the day, which could introduce further volatility in oil markets, especially in the current environment.
