Gold, Oil Prices Tumble Amid Rising Tensions from US-Iran Conflict
Oil & Gas

Gold, Oil Prices Tumble Amid Rising Tensions from US-Iran Conflict 

Last updated on September 19th, 2020

Right after Iran launched more than a dozen ballistic missiles against bases in Iraq, which are housing US troops, the oil prices witnessed a major hike. With a slight drop from a four percent spike, US crude was up more than 1.2 percent to over $63 a barrel. A global oil benchmark, Brent crude was up 1.6 percent to about 69 percent a barrel.

The Iran attack is the Middle Eastern country’s response to the US killing of Iranian General Qasem Soleimani in Baghdad. Responding to the attack, Iran called it an “act of war” and “state terrorism”. As per the Director of Commodity Research at ClipperData, Matt Smith, “It comes as no surprise that there has been a reprisal from Iran — the concern is that this is just the sign of things to come.”

With reference to the damages, the US Department of Defense – the Pentagon said, “working on initial battle damage assessments” and “we will take all necessary measures to protect and defend” US personnel and allies in the region.

As stated by the OPEC’s Secretary General Mohammed Barkindo, “Iraqi oil facilities are secured and the country’s production is continuing.” The Iranian oil minister Bijan Zanganeh said yesterday that Tehran is benefitting from the hike in oil prices, and hence called on the US to quit the region. He added, “The trend of oil prices is up and this benefits Iran … Americans should stop disturbing the region and let the people of the region live.”

As per the Chief Market Strategist of AxiTrader, Stephen Innes, “Higher oil prices pose significant economic risks to Asia, given its heavy reliance on that region for its oil imports. The oil importers with chronic trade deficits like India, Indonesia, the Philippines will be particularly vulnerable to oil price shocks.”

The Middle East, particularly the Strait of Hormuz is the source of 60 percent of outside crude oil and LNG imports for the Asian countries. As the US-Iran conflict is showing possibilities of worsening situation in near future, the Asian countries are nervous about meeting their oil demands. As per the head of S&P Global Platts Asia Analytics, Kang Wu, “For now, Asian refiners have to deal with volatile and often spiking oil prices when sour crude-based crack margins are already in the negative territory.”

According to data released by a UK company, RAC, “with the rising pump prices in the UK, the ongoing four-month long petrol prices came to a halt by the end of December”. The price of diesel rose 0.87p and that of unleaded hiked from 0.24p to 126.11p. Analysts expected the European equity markets to open lower. The pan-region Euro Stoxx 50 futures were down 0.77 percent, German DAZ futures were off 0.91 percent and FTSE futures were 0.45 percent lower.

Plunging more than 1 percent in the day, the MSCI’s broadest index of Asia-Pacific shares outside Japan was down by 0.72 percent. China’s blue-chip CSI300 index was 1.18 percent low. Although Australian shares got back from more than one percent drop to shed 0.13 percent US, Japan’s Nikkei fell 1.57 percent.

A further spike in the oil prices, gold and shares will severely affect the world economy that is already struggling from weak manufacturing activity post the aftermaths of US-Iran conflict.

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