Authored by Rae Wee
SINGAPORE (Reuters) – Share prices in Asia dropped while gold prices increased on Monday due to heightened concerns over risk following Iran’s retaliatory strike on Israel, which raised fears of a potential wider conflict in the region and kept traders anxious.
The dollar reached a new 34-year peak against the yen amid growing speculations that persistent inflationary pressures in the United States will lead to extended higher interest rates.
Starting the week cautiously, markets in Asia saw a decline. MSCI’s comprehensive index of Asia-Pacific shares outside Japan decreased by 0.7% after Iran’s recent offensive on Israel on Saturday with explosive drones and missiles, believed to be in response to an alleged Israeli assault on an Iranian consulate in Syria on April 1.
This marked Iran’s first direct strike on Israeli soil.
The possibility of warfare erupting between the long-standing adversaries in the Middle East and potentially involving the United States has put the region on edge. U.S. President Joe Biden informed Prime Minister Benjamin Netanyahu that the U.S. will abstain from participating in any retaliatory actions against Iran.
Israel declared that the “campaign is not finished yet”.
The Nikkei index in Japan dropped more than 1%, while Australia’s S&P/ASX 200 index fell by 0.6%.
Meanwhile, Hong Kong’s Hang Seng Index plunged by 0.8%.
The rising tensions prompted a shift towards safer assets, causing gold to surge by 0.51% to $2,356.39 per ounce and boosting the safe-haven dollar across the board, extending its 1.6% increase from the previous week. [GOL/]
Conversely, oil prices showed minimal reaction to the news, as most traders had already factored in a retaliatory strike from Iran that could further disrupt supply chains. This led to Brent crude futures hitting $92.18 per barrel last week, its highest level since October.
At present, Brent was down by 0.5%, trading at $90.01 per barrel, while U.S. West Texas Intermediate crude futures witnessed a decline of about 0.6%, reaching $85.13 per barrel. [O/R]
“The primary concerns for the global economy revolve around the potential escalation into a broader regional conflict and the impact on energy markets,” stated Neil Shearing, Chief Economist at Capital Economics.
“An increase in oil prices could complicate efforts to bring inflation back to target levels in developed economies, but it will only significantly influence central bank decisions if the elevated energy prices translate into core inflation.”
On the other hand, U.S. stock futures slightly moved…
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