Global stocks slide while oil and gold surge after Iraq airstrike

Investors seek 'safe havens' with fears that the killing of a top Iranian general in Iraq may spark further conflicts in the Middle East


Global stocks faltered while oil and gold surged as investors feared the US airstrike that killed a top Iranian general in Iraq may heighten tensions in the oil-rich Middle East.

Germany’s DAX was down 1.25 per cent. France’s CAC40 closed 0.04 per cent up and the UK's FTSE100 climbed to close up 0.24 per cent, reflecting a surge in oil stocks after a lower open.

Shares of major oil companies were some of the biggest gainers along with crude prices, while airline stocks slumped.

French oil and gas giant Total ended 0.8 per cent higher, while Royal Dutch Shell and BP climbed 1 per cent and 2 per cent respectively.

Deutsche Lufthansa slumped 6.95 per cent, as did Air France KLM, down 7.88 per cent.

WTI crude oil futures, the US benchmark, gained around 4 per cent to $63.64 a barrel during the trading session, while Brent crude soared 4 per cent to hit $69 a barrel, its highest price since mid-September after a missile attack on Saudi Arabia’s oil facilities.

Gold prices hit a four-month high as silver pushed to a two-month high amid investors seeking safe-haven demand for precious metals.

“Gold’s a winner as tension increases and oil prices are higher too," Kit Juckes, chief FX strategist at Societe Generale, told Bloomberg. "Bond yields are lower, the equity rally which was underway in the US has stalled but not gone dramatically in reverse and, in the FX market, safe havens and oil-sensitive currencies benefit but it’s the yen which is the clear winner.”

President Trump ordered the drone strike that killed Qassem Suleimani, Iran’s Quds Force commander, along with Abu Mahdi al-Muhandis, a top commander of Iran-backed militias in Iraq

Iranian foreign minister Javad Zarif called the strike “an act of international terrorism’’.

Steven Leung, executive director at UOB Kay Hian in Hong Kong said investors are worried that the situation in Iran will worsen, since there could be some retaliation after the US attack.

“People will want to cut risk ahead of the weekend. Stocks have rallied a lot in the past month or so, so any bad news flow is a reason to take profit,” he said.

All three major US stock indexes retreated sharply at the open after the record closes of the previous session.

The Dow Jones Industrial Average hit a low of 28,500.36 before recovering later in the session to 28,614 in mid-day trade, down 0.9 per cent on the previous close, while the S&P 500 was 0.72 per cent lower at 3,234.53 and the Nasdaq Composite was down 0.76 per cent at 9,022.79.

FURTHER READING: US and Iran allies try to diffuse tensions after US airstrike

FURTHER READING: US drone strike kills Iran's General Qassem Suleiman

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