Oil price hits USD 70 and stocks continue to drift as tensions escalate in the Middle East

Three days after the killing of Iranian general Qassem Suleimani, tensions in the region continue to rise. While Iran is threatening with retaliation, pulling back from the international nuclear accord, and unfurling the red flag of revenge, the US is planning new “massive” economic sanctions and warns a “major retaliation.”

All this belligerence is now spilling over on the global economy. Fears of skirmishes, battles, or acts of sabotage in the Persian Gulf, which could lead to a shut-down of oil transit through the Strait of Hormuz, the world’s most important oil chokepoint, have surged oil prices worldwide. Futures for Brent crude reached USD 70.24 per barrel, while US oil futures went up to USD 64.36.

Stocks are also falling, with Japan’s Nikkei index losing 2%, South Korea’s KOSPI losing 0.8%, the Hong Kong Hang Seng Index also dropped 0.7%, while US futures fell about 0.5%. European markets are also on track for their worst day since the start of December, with Germany’s DAX dropping by 1%, while the UK FTSE 100 went down by 0.7%. The biggest hit was taken by the Saudi stock market, which tumbled by 2.4% on Sunday. Meanwhile, gold prices have reached the highest figure in the past 7 years, at USD 1,573 per Ounce.

“Iran has promised ‘severe revenge’ for the death of Soleimani and has already pulled back from the 2015 nuclear accord. The markets have reacted with crude oil spiking on concerns over further supply disruptions in the Middle East, while gold has soared past its 2019 high on raised safe-haven demand. Stocks have fallen sharply, although the downside has been limited due to expectations that the raised tensions will have minimal impact on global growth.” Said Fawad Razaqzada, market analyst at Forex.com, according to The Guardian.