The recent escalation of tensions in the Middle East following Iran’s unprecedented attack on Israel has prompted a surge in gold prices, while Asian stock markets predominantly experienced declines on Monday.
In the wake of the attack, Hong Kong’s Hang Seng Index saw a 0.8% drop in mid-afternoon trading. Japan’s Nikkei 225 followed suit with a 0.7% decrease, while South Korea’s Kospi ended the day down by 0.4%. Contrarily, China’s Shanghai Composite Index concluded with a 1.2% increase.
Spot gold observed a 0.5% uptick, reaching $2,355 per ounce on Monday. This ascent follows a record high of $2,431 per ounce on Friday, spurred by apprehensions of potential further hostilities between Iran and Israel. Year-to-date, gold has surged by 18%.
In contrast, US gold futures remained relatively stable on Monday, reflecting a 15% increase for the year thus far.
Oil prices, having climbed to their highest levels since October in anticipation of retaliatory actions from Iran, experienced a minor retreat during Asian trading hours on Monday. This pullback occurred as traders reassessed the geopolitical risk premium following Israeli military officials’ assertions of minimal damage from the attack.
However, both US crude futures and Brent crude, the global oil benchmark, have sustained significant year-to-date increases of 6.7% and over 10%, respectively.
ANZ analysts noted in a research report on Monday that “Heightened tensions in the Middle East amid a worsening geopolitical backdrop kept commodity markets on edge.” They also emphasized the potential for disruption to oil supply in light of Iran’s recent attack and highlighted the importance of Israel’s response in determining the extent of this risk.
The Middle East region finds itself in uncharted territory following Iran’s launch of numerous missiles towards Israel late Saturday. Israel’s military reported intercepting “99%” of the over 300 projectiles.
This attack came in the wake of a suspected Israeli strike on an Iranian diplomatic complex in Syria earlier in the month, indicating a pattern of escalating tensions.
Prior to Iran’s assault, US stocks experienced significant declines on Friday, driven by concerns over the escalating situation in the Middle East.
Despite these concerns, US futures cautiously rose in Asian trading hours on Monday, following reassurances from US President Joe Biden and his national security team. They conveyed to counterparts the United States’ stance of abstaining from participating in any counter-strike against Iran in efforts to mitigate the risk of a broader regional conflict.
Dow futures saw a 0.4% increase of 150 points, while S&P 500 and Nasdaq futures both showed a 0.5% uptick.