Dow Futures Tumble, Gold Nears 7-Year High As Investors React to Rising U.S.-Iran Tensions From Soleimani Killing

Global stocks retreat, while gold nears its highest levels in seven years, as investors react to the ripple effects from last week's killing of a key Iranian military commander in Iraq.
Author:
Updated:
Original:

The Monday Market Minute

  • Global stocks slide, while investors reach for defensive help from gold and Treasuries, following last week's killing of Iranian Major-General Qassem Soleimani.
  • Millions mourn Soleimani's death in Tehran, while his sister calls for revenge and President Trump cautions that the U.S. could strike 52 separate targets if Iran retaliates.
  • Crude prices extend surge, taking Brent past the $70 per barrel mark, as investors fear attacks on American or Saudi targets in the Gulf region.
  • Government bond yields fall while gold tests seven year peaks as investors retreat from risk markets around the world.
  • Wall Street futures set for another opening bell slide ahead of PMI services data at 9:45 am Eastern Time.

U.S. equity futures extended declines Monday, while global stocks followed in retreat and oil prices continued to surge, as investors around the world counted the potential costs of rising military tensions in the Gulf region following last week's killing of Iranian general Qassem Soleimani.

Millions of Iranians mourned the general's death Sunday as a cascading effected from his killing -- which was directly ordered by President Donald Trump -- rippled through regional politics and financial markets around the world. 

The general's sister, Zeinab Soleimani vowed revenge in a nationally televised address, while Iran's leaders said they would immediately roll back on commitments linked to the 2015 non-proliferation agreement that Trump abruptly abandoned in 2018.

Trump, for his part, warned that any retaliation from Tehran would trigger potential strikes on any of 52 separate targets -- including cultural sites -- while leaders in Europe and Asia attempted to de-escalate the growing crisis with calls for diplomacy from both sides.

At the same time, however, Iraqi Parliament said it supported a recommendation from Prime Minister Adil Abdul-Mahdi that all foreign troops -- including U.S. military servicemen -- leave the country.

Global financial markets, meanwhile, adopted a notably defensive tone in overnight trading, with gold prices rising to the highest levels in nearly seven years and government bond yields tumbling across the board as investors retreated from risk markets from Tokyo to Toronto.

U.S. equity futures lead the downside charge, with contracts tied to the Dow Jones Industrial Average, which fell 234 points on Friday, primed for a further 180 point decline while those linked to the S&P 500 suggest an opening bell pullback of around 18.2 points.

Benchmark 10-year U.S. Treasury bond yields, which have fallen some 10 basis points since the early Friday session, were marked at 1.785% in overnight dealing while spot gold rose 1.6% to $1,579.60 per ounce - just shy of the highest level since April 2013.

Oil prices, too, added to Friday's surge following the death of Major-General Qassem Soleimani, who lead the Quds Force of Iran's Revolutionary Guards, amid concerns of reprisal attacks on tankers and installations in the Gulf region - which is home to around half of the world's crude production.

Brent crude futures contracts for February delivery, the global benchmark for pricing, were last see seen 96 cents higher from their Friday close in New York and trading at $69.52 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 70 cents higher at $63.75 per barrel.

European stocks opened weaker across the board, with the Stoxx 600 falling 1.15% in Frankfurt, lead to the downside by travel, automotive and banking sector shares. Britain's FTSE 100 was also marked 0.9% lower in the opening hour of trading in London.

Overnight in Asia, Japan's Nikkei 225 resumed trading after an extended New Year break, allowing investors to catch up with the weekend's events in the Gulf and take the benchmark 1.91% lower to 23,204.86 points. The region-wide MSCI ex-Japan index, meanwhile, was marked 0.91% lower, falling from its recent 18-month peak, heading into the final hours of trading.