US EditionIran war escalation wakes markets up to risks of deeper economic pain
A 40% surge in oil prices due to Iran conflict prompts investors to reconsider Federal Reserve rate cuts amid rising inflation and policy uncertainty.
- On Wednesday, the Federal Reserve held interest rates steady for the second consecutive meeting while forecasting higher inflation this year, as Fed Chair Jerome Powell cited the surge in oil prices stemming from the conflict in Iran.
- Oil prices jumped to $119 a barrel on Thursday as Iran attacked energy facilities following Israel's strike on the South Pars gas field, marking the biggest escalation of the conflict yet.
- Britain's two-year yields jumped over 30 basis points while U.S. short-dated bond yields climbed about 10 basis points, reflecting broad surges in government bond yields from Britain to the United States.
- Traders now price in two Bank of England rate hikes by year-end, while markets see a roughly 60% chance of a European Central Bank rate hike in April, reflecting divergence from Fed policy.
- Analysts warn the supply shock could "morph into a demand shock," potentially causing a painful broader market washout as the conflict muddies the Federal Reserve's path regarding above-target inflation.
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Analysis by Allison Morrow and Hanna Ziady, CNN The war in Iran has provoked what economists call a “black swan” event: an unexpected shock so destructive that no one is immune to it. As the so-called kinetic war unfolds in the Middle East, where hundreds of civilians have lost their lives, an economic earthquake spreads from the Persian Gulf. Virtually everyone is about to feel its consequences. “In this situation, nobody wins,” said Josh Lipsk…
Gold and silver recorded strong drops of joi, losing approximately 5%, respectively 10%, in a wide range of sales that affected global markets, on the basis of concerns about Iran's conflict and inflationist pressures, the CNBC transmits.
Iran war escalation wakes markets up to risks of deeper economic pain
Investors reassessing the potential for deeper economic pain from the war in Iran are selling assets across the globe, from government bonds to stocks and gold, reigniting fears that markets may become vulnerable to a bigger dislocation.
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