Iran's missile attack on U.S. army bases in Iraq overnight sent gold blasti...
LONDON - Iran’s missile attack on U.S. army bases in Iraq overnight sent gold blasting above $1,600 an ounce, boosted the Japanese yen by almost 1% and oil by $3 a barrel.
Welcome to the brave new world where it appears that little short of full-fledged world war between nuclear-armed powers would be required to have a durable impact on financial markets. And even then, some begin to wonder. So traders and investors are betting as much on repeated patterns of behavior rather than on amateur geopolitical reasoning.
A geopolitical risk index compiled by U.S. Federal Reserve Board researchers Dario Caldara and Matteo Iacoviello rates the Saudi attacks at a relatively high 185 points, but well below the 2003 U.S. invasion of Iraq that scored 545 points.For decades, the energy price impact has been the main transmission mechanism from major conflicts - particularly in the Gulf - to the wider economy and world markets.
“In 2020, oil sellers spend that money with abandon and so a higher oil price does not mean a big drop, or potentially any sort of drop, in economic demand.”Of course, wars and invasions have driven big market shifts in the past, causing mini-panics and safe-asset buying on fears for business confidence, trade and energy prices.
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