Stocks rally, oil slips as investors re-assess Iran risk

Tens of thousands gathered for the funeral of Qasem Soleimani in Tehran

Brent crude fell and stock markets rallied as investors re-assessed the level of risk over the Iran crisis.

Investors questioned how strongly Iran would respond to the killing of military commander Qasem Soleimani in the face of a severe warning of further strikes and economic sanctions from the US.

Brent was down 1.1% at $68.14 a barrel, having been as high as $70.74 on Monday, and West Texas Intermediate fell 1% to $62.61.

Stock markets in Asia rebounded from Monday’s falls. Japan’s Nikkei was up 1.5% while Hong Kong’s Hang Seng rose 0.48%. The Dow rose 0.24%, while the S&P 500 gained 0.35% and the Nasdaq 0.56%.

The FTSE 100 was up in early trade today, 18 points higher at 7593 in the first half hour but ended the day 1.49 points or 0.2% lower at 7573.85. Sterling rose overnight to $1.3173 on better economic data in the UK.

Tom Porcelli, chief US economist at RBC Capital Markets said: “While the risk of conflict has increased, the reality is this is likely to be limited to proxy skirmishes.

“The risk of a ‘hot’ conflict seems low as Iran is unlikely to respond in such a way that risks a significant escalation from the United States.”

Gold also retreated to $1,558.67 an ounce, after scaling a near seven-year peak of $1,582.59 overnight.

Russ Mould, investment director at AJ Bell, said: “Interestingly the market isn’t behaving as you might expect.

“In times of strife you would normally expect to see people flock to defensive sectors like utilities and healthcare. In reality the only so-called safe-haven seeing price appreciation is gold which has now increased by nearly 8% over the past 30 days.”

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