The Friday Market Minute
- Global stocks slide, crude prices surge after President Trump orders deadly drone strike on top Iranian military commander.
- Major-General Qassem Soleimani killed in drone strike near Baghdad airport in what could be a dramatic escalation of the ongoing conflict between Washington and Tehran.
- Crude prices surge more than $3 per barrel in overnight trading as Iran's supreme leader vows revenge on American targets.
- Government bond yields fall, safe-haven assets gain as investors retreat from risk markets amid ongoing holiday-thinned liquidity.
- Wall Street futures set to retreat sharply from record highs Friday ahead of ISM manufacturing data at 10:00 am Eastern Time.
U.S. equity futures traded sharply lower Friday, while global oil prices soared to multi-month highs, after a key Iranian general was killed in a targeted drone attack ordered by President Donald Trump.
Major-General Qassem Soleimani, who lead the Quds Force of Iran's Revolutionary Guards, was killed, along with several other Iranian militants, near Baghdad airport Thursday in what could mark a significant escalation in the ongoing military tensions between Washington and Iran and the broader Gulf region since the U.S. exited a multi-lateral nuclear weapons treaty with Iran in 2018.
"At the direction of the president, the U.S. military has taken decisive defensive action to protect U.S. personnel abroad by killing Qassem Soleimani," the Pentagon said in a statement. adding the general was "actively developing plans to attack American diplomats and service members in Iraq and throughout the region".
President Trump has yet to make an official comment following the drone strike, but Tweeted an image of an American flag shortly after reports began to detail the mission's results and expressing a desire to negotiate with Tehran.
Global financial markets reeled with the news, however, pulling U.S. equity futures sharply lower and driving safe-haven assets prices such as U.S. Treasury bonds and gold notably higher.
Futures contracts tied to the Dow Jones Industrial Average are indicting a 265 point opening bell decline on the second day of trading for the new year, following record closes for U.S. stocks last night, while those linked to the S&P 500 suggest a 30 point retreat for the broader benchmark. Nasdaq Composite futures, meanwhile, are primed to a 110 point decline.
Global oil prices surged on the news, taking Brent crude more than $3 per barrel higher in the overnight trading session, as Iran's supreme leader, Ayatollah Ali Khamenei, vowed to seek revenge on American targets with the help of allies around the Muslim world.
"It's hard to overstate the geopolitical importance of the assassination of Qassim Soleiman, architect of Iran's external military activity for more than 20 years and perhaps the most powerful man in the country after the Supreme Leader," said Ian Shepherdson of Pantheon Macroeconomics. "Iran right now is reeling from the assassination, but the leadership is dominated by hardliners and the question is how, not whether, they will respond. For markets, the key issue is the impact of the Iranian response on oil prices."
Brent crude futures contracts for February delivery, the global benchmark for pricing, were last see seen $2.57 cents, or 3.88% higher from their Thursday close in New York and trading at $68.82 per barrel, the highest level since the days following September's missile strike on a Saudi Aramco tanker in the Strait of Hormuz, which were largely accepted to have been carried out by Iran.
WTI contracts for the same month, which are more tightly-linked to U.S gasoline prices, were marked $2.22, or 3.63% higher at $63.40 per.
European stocks traded weaker across the board as tensions mounted in the nearby Gulf region, with the Stoxx 600 falling 0.75% and Germany's DAX index slumping 1.7% as surging oil prices and the threat of airspace restrictions hit some of the region's biggest carriers.
Britain's FTSE 100 fell 0.3% in London, with the export-focused benchmark supported by solid gains for oil majors thanks to the overnight spike in crude prices.
Overnight in Asia, the safe-haven yen rose to a four-week high of 107.97 against the U.S. dollar, even as broader Japanese markets remained closed for a stretch of New Year holiday celebrations, capping moves in U.S. Treasury bonds as a result.
Gold prices were marked 1.55% higher at $1,551.80 per ounce, the highest in at least four months.
The region-wide MSCI Asia ex-Japan benchmark, meanwhile, was seen 0.2% lower heading into the final hour of trading, while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was seen 0.11% higher at 96.95.