The recent events in the Middle East, particularly the Israeli attack on Iran and the subsequent retaliation by Tehran, led to significant losses on Friday in the US stock markets. The three major indices reacted with noticeable declines:
- Dow Jones Industrial Average: The index fell by 1.8 percent to 42,198 points.
- Nasdaq Composite: The technology-heavy index lost 1.3 percent, closing at 19,407 points.
- S&P 500: The broader index declined by 1.1 percent, ending the trading day at 5,977 points.
Impact on Investors
Direct Effects
- Stock Prices: The losses primarily affect US stock indices.
- Commodity Prices: Oil prices rose by up to 15 percent before stabilizing with a gain of about seven to six percent.
- Gold Price: Gold benefited as a “Safe Haven”.
- US Bonds: Surprisingly, US government bonds came under pressure; the futures contract for ten-year securities fell by 0.46 percent to about 110.55 points, and the yield rose to around 4.43 percent.
Indirect Effects
- Inflation Risk: Higher crude oil prices could drive inflation.
- Consumer sentiment in the US is better than expected, despite geopolitical uncertainties.
Possible Contagion Risks for European Markets
The developments in the Middle East can also affect European financial markets:
- European stock indices could also come under pressure.
- Europe’s dependence on energy from the Middle East increases risks associated with persistently high oil prices.
Summary
The recent escalation in the Middle East led to significant losses in US stock markets and rising commodity prices. For investors, this means both direct losses in value as well as risks from potential inflation spikes. European markets are potentially affected as well – particularly through energy channels.