Stocks fell Tuesday and rushed Investors To safe haven assets such as Treasury bonds And the dollar After Iran launched a barrage of ballistic missiles at Israel. Iran said the attack was a response to Israel’s campaign against the Lebanese Hezbollah group, an ally of Tehran. Israel said the attack would have consequences.
And it went down Standard & Poor’s 500 index by about 1.4 percent, but it later reduced its losses to close down 0.9 percent, while the index fell Nasdaq The compound rose 2.3 percent, but erased some losses to end the day down 1.5 percent. Purchasing activity was high for assets that investors accept in times of stress, such as gold, treasury bonds, and the dollar.
Episodes of geopolitical tension were in the past, such as war Russia In Ukraine in 2022, it caused sharp market movements, but it was short-lived Investors They flee riskier assets and embrace safe havens such as… gold And the dollar.
Investors said the market’s reaction this time may depend on Israel’s response and whether the conflict between the two arch-enemies will escalate.
“The market…is very sensitive to any worst-case scenario than this,” said Hasnain Malik, head of emerging and frontier markets equity research at Tellimer.
A previous group of Iranian missiles were fired at Israel in April for the first time ever, but were shot down with the help of the US military and other allies. Israel responded at the time by launching air strikes on Iran, but the situation was avoided escalating further.
April witnessed a wave of selling in stocks and other high-risk assets, but it rebounded within days as fears of a widening conflict and economic turmoil receded.
But Alan Small, senior investment adviser at Alan Small Financial Group and IA Private Wealth in Toronto, said: “If the war escalates, that is of course not good for the markets.”
One of the concerns that investors have in particular is the prices Oil That jumped Tuesday. Investors fear that fears of disruption to crude supplies from the Gulf region will lead to a sharp rise in prices, as happened during previous rounds of severe tension or conflict.
“As the conflict intensifies, prices could rise,” Quincy Crosby, chief global analyst at LPL Financial, said in a note. Oil Indeed, with the high risk of military response leaning towards the oil-producing region around Iran.”
In addition to the tension in the Middle East, there are a number of factors in the market whose results are unknown and which may leave investors in a state of confusion, including the upcoming US elections in November and the important jobs report this week, which will contribute to determining the direction of the Federal Reserve’s policy.
And rose Kobe Volatility Indexan indicator based on the availability of options through which the volume of demand for protection from market fluctuations is measured, reached its highest level in three weeks at 20.73 on Tuesday, before the increase diminished to record 19.25.
“Although,” Crosby said Volatility index “It is trending higher, still just below the 20 level, which indicates that the markets, including the crude oil market, do not envision a comprehensive military scenario yet.”
Meanwhile, options analysis service Orats notes that pricing on SPDR S&P 500 Trust ETF options that expire on November 8, just three days after the US election, implies a move… About two percent for an index fund that tracks the S&P 500 on expiration day.
“This reflects traders’ expectations of significant market volatility at election time,” said Matt Amberson, founder of Orats.
In the nearer term, Amberson said traders remain focused on the September jobs report scheduled for release on Friday, with index fund options bracing for a 1.1 percent intraday volatility, indicating expectations of potential surprises in unemployment data.
Currently, players in market operations are studying the situation to conclude whether the latest wave of effects will be fleeting. “Markets are likely to be incredibly sensitive to the geopolitical news flowing in the coming hours,” said Michael Brown, senior research analyst at Pepperstone.
