World oil prices fell Monday, as traders bet on a de-escalation in the Middle East, despite attacks on Israel by key oil producer Iran.
Brent fell 0.4% while WTI prices lost 0.3%, while global stock markets diverged.
Iran fired more than 300 ballistic missiles and attack drones and a barrel-barreled drone attack on Saturday evening. Most were held back by Israeli air defenses.
Tehran said the airstrike was a legitimate response to the deadly attack on the Iranian embassy building in Damascus aimed at Israel. But it also said “the matter can be considered resolved.”
“Markets see de-escalation as the most likely path despite Iran’s attacks,” notes analysts at DNB Markets.
“The attack was well announced, with Israel and its allies fully prepared, causing little damage and no casualties, and with Iran quickly saying ‘the matter can be considered closed’. A clear invitation to de-escalate.”
Also read: Regional tensions increase due to Iran’s threat of attack on Israel
Experts say the limited scope of the attack shows Iran wants to show strength, but without sparking conflict.
US President Joe Biden has reportedly warned Israeli Prime Minister Benjamin Netanyahu to “take the win” and leave no reply.
Nevertheless, Asian equities mostly fell on concerns about wider conflict in the volatile Middle East, although Shanghai shares surged higher on news of new regulatory measures that could help its long-term performance.
Also read: Israeli Army Promises to Reply to Iranian Attacks
“All eyes remain on whether there will be a response from Israel and markets are likely to be volatile in the days ahead on any geopolitical news,” said Saxo analyst Redmond Wong.
Analysts at Deutsche Bank said “there is a risk that geopolitical shocks damage growth, accelerating the timing of a rate cut.”
In Europe, London equities fell as energy shares took a hit from weak oil prices, but Frankfurt and Paris rose as data showed a strong recovery in euro zone industrial production for February.
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Wall Street’s three main indexes closed firmly lower on concerns over conflict in the Middle East, despite solid US economic data.
March retail sales topped expectations with monthly growth of 0.7%, in another indication that the U.S. economy remains strong despite the Federal Reserve’s high interest rates intended to dampen inflation.
US equity markets are largely anticipating a muted chance of a cut in US interest rates as strong economic growth means better prospects for corporate profits.
“It’s better to have solid economic growth amidst moderate inflation and high interest rates, than to have the economy plummet along with lower interest rates and falling inflation,” said investment analyst Bret Kenwell at brokerage eToro.
On the corporate earnings front, Goldman Sachs beat expectations with a 27% rise in first-quarter profit to $3.9 billion. The shares rose 2.9%.
Tesla shares fell 5.6% following reports the electric carmaker plans to cut its global workforce by more than 10% amid declining sales and price cuts.
Industrial metals prices surged on the London Metal Exchange following a ban on supplies from Russia as part of sanctions over its offensive in Ukraine. Copper and aluminum prices reached levels last seen in June 2022.
The dollar hit a new 34-year high against the yen at above 154 yen against the US dollar, and reached its highest level since November against a basket of rival currencies. (AFP/Z-3)
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