Stocks fall, gold soars as traders seek safe havens

Gold bars are displayed at the headquarters of Mitsubishi Materials Corporation in Tokyo on Jan 9, 2008.
Gold bars are displayed at the headquarters of Mitsubishi Materials Corporation in Tokyo on Jan 9, 2008.PHOTO: REUTERS

Stocks took a tumble across most of Asia as investors rushed to safe havens after a United States air strike killed a prominent Iranian general.

Gold soared to its highest price in more than six years and crude oil extended gains to around US$70 a barrel amid fears of supply disruptions in the Middle East - Asia's top oil supplier.

The MSCI Asia-Pacific Index sank about 1 per cent as stocks from Japan to Hong Kong fell, while the US and European stock futures retreated.

The Japanese yen matched a three-month high before paring gains, while US Treasury yields steadied after ticking lower last week.

In Singapore, the stock index closed 0.6 per cent lower.

The security situation looked fragile as Iran and the US traded threats at the weekend, fanning fears of a wider conflict.

Iran said it has to "settle a score with the US" and would no longer abide by any limits on its enrichment of uranium.

US President Donald Trump doubled down on threats to target 52 Iranian sites if Teheran retaliates against the Jan 3 killing of Major-General Qassem Soleimani.

Mr Trump also vowed to impose sanctions on Iraq, the region's second-biggest oil exporter, if US troops were expelled from the country as voted by the Parliament in Baghdad.

A precipitous escalation between Iran and the US may overshadow a rather positive start to the year for stocks, with a US-China "phase one" trade deal expected to be signed later this month.

Markets had rallied in the final months of last year, with the MSCI Asia-Pacific Index rising about 16 per cent and the World Index surging 24 per cent.

The Straits Times Index managed to notch up a 5.02 per cent gain last year, recovering from a volatile year, with two major sell-offs in May and August.

An energy supply crisis can also scuttle hopes of a global economic recovery.

Saudi Arabia, Iran and Iraq together pumped more than 16 million barrels of oil a day last month. Most of their exports leave the Persian Gulf through the Strait of Hormuz, a narrow waterway that Iran has repeatedly threatened to shut.

Brent futures rose as much as 3 per cent to US$70.74 on ICE Futures Europe and were at US$69.99 in early trade in London. The benchmark surged 3.6 per cent last Friday.

West Texas Intermediate advanced 1.7 per cent to US$64.10 on the New York Mercantile Exchange.

Gold was seen as a more effective hedge to the crisis. Spot bullion climbed as much as 2.3 per cent to US$1,588.13 an ounce, the highest level since April 2013, and traded at US$1,574.29 in early London trade.

The State Department said in a tweet that there is a risk of attacks particularly in the eastern province of Saudi Arabia and near the Yemeni border, and close to military bases as well as oil and gas facilities.

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A version of this article appeared in the print edition of The Straits Times on January 07, 2020, with the headline 'Stocks fall, gold soars as traders seek safe havens'. Print Edition | Subscribe