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The finance world holds its breath, awaiting the unfolding of the simmering yet sustained tensions in the Middle East region.
On Friday morning, having woken up on the wrong side of bed to the news of Israeli strikes against Iran’s center, investors did not immediately realize that the conflict between the two parties, for the moment, resembles a game of ping-pong.
That being said, safe-haven assets like gold or the Swiss franc remained sought after on Friday, contrary to stocks, considered risky assets.
Around 10:50 GMT, the Swiss currency gained 0.43% against the greenback, at 0.9084 Swiss francs per dollar.
Meanwhile, gold rose by 0.11% to $2,381.73 per ounce, not far from its all-time high reached last week at $2,431.52.
No Damage
After hearing statements from Iranian officials downplaying the effects of the attack, assuring that the explosion on Friday in the sky of Isfahan caused “neither an accident nor damage” and that “nuclear facilities were not affected,” oil prices fell on Friday after jumping more than 4% in the hours following the explosions in Iran, as the market hoped for a de-escalation of tensions between Iran and Israel.
“If oil prices acted as a barometer of geopolitical risk in the Middle East, current levels would suggest it’s not an issue,” commented Stephen Innes, an analyst at Spi AM.
The price of Brent crude, for delivery in June, dropped by 0.67% to $86.53, and its US equivalent, West Texas Intermediate (WTI) crude, for delivery in May, fell by 0.62% to $82.22.
Moreover, after losing up to 0.95% in the morning, the CAC 40 index declined by 0.25% to 8,002.6 points at midday.
As for government bonds, they remained in demand on Friday, causing their yields to fall. The yield on the ten-year US Treasury note, the global benchmark, dropped by six basis points to 4.58%.
Although investors’ initial reaction on Friday was to avoid taking risks, it significantly diminished as the day progressed.
Watching the Strait of Hormuz
Nevertheless, observers keep an eye on the Strait of Hormuz, through which a fifth of the world’s oil production passes daily. Any disruption at this crucial passage point between Iran and Oman could be catastrophic for the global economy and drive oil prices up by more than 10%.
It’s worth noting that the Persian Gulf region produces over 20 million barrels per day.
