Stock markets experienced declines while oil prices rose on Tuesday amid escalating concerns of a broader conflict in the Middle East following Israel’s army chief’s commitment to retaliate against Iran’s unprecedented assault on the country over the weekend.
The downward trend in the markets followed significant declines in Wall Street’s key indices, prompted by stronger-than-anticipated US retail sales data that highlighted the robustness of the world’s leading economy and diminished prospects for interest rate decreases this year.
In addition, traders were analyzing data revealing that Chinese economic expansion exceeded forecasts in the initial three months of the year. However, both retail and industrial metrics fell far below expectations, indicating that policymakers have significant tasks ahead to stimulate growth.
Attention has turned to the Middle East as Tehran unleashed hundreds of missiles and drones at its regional foe. Tehran asserted that the strike was a response to an April 1 attack on the consular annex of its Damascus embassy, which claimed the lives of seven Revolutionary Guards, including two generals.
While air defence systems destroyed the vast majority of the barrage and Iran said “the matter can be deemed concluded”, Israel’s army chief General Herzi Halevi sounded a note of warning, fuelling worries of a dangerous escalation.
“This launch of so many (Iranian) missiles, cruise missiles, and UAVs into the territory of the State of Israel will be met with a response,” Halevi told troops at the Nevatim military base, which was hit in Iran’s Saturday barrage.
However, he added that the military would not be distracted from its war against Hamas in Gaza.
Warren Patterson, at ING Groep, said the prospect of a response by Tel Aviv “means that this uncertainty and tension will linger for quite some time”.
“The more escalation we see, the more likely we are to see oil supply from the region impacted.”
In Asian trade, oil prices edged up, reversing losses from Monday, as hopes for de-escalation rose following US urging for Israeli Prime Minister Benjamin Netanyahu to opt for a peaceful resolution rather than retaliation.
Stock markets in Hong Kong, Seoul, Taipei, and Manila all tumbled by more than two percent, with Tokyo’s market also sliding by 1.9 percent.
Shanghai, Sydney, Singapore, and Jakarta all posted declines exceeding one percent, while Wellington and Mumbai also suffered losses. London, Paris, and Frankfurt in Europe also saw drops of more than one percent.