LONDON • Oil prices jumped nearly US$2 a barrel and gold, the yen and safe-haven bonds surged yesterday after a US air strike killed a top Iranian commander in Iraq, ratcheting up tensions.
Wall Street stocks opened sharply lower, with the Dow Jones Industrial Average down 0.9 per cent and the S&P 500 shedding 0.9 per cent. The Nasdaq Composite Index fell 1 per cent. Hong Kong's Hang Seng lost 0.3 per cent, and Germany's DAX index was trading 1.7 per cent lower. The Japanese yen rose 0.5 per cent to the dollar to a two-month high, and the Swiss franc hit its highest against the euro since September.
The Middle East-focused oil markets saw the most dramatic moves, with Brent crude futures up nearly US$3, or 4.5 per cent, to US$69.20 a barrel, the highest since September.
"Geopolitics has come back to the table, and this is something that could have major cross-asset implications," said Lombard Odier chief investment strategist Salman Ahmed.
"What is critical is how it pans out in the next few days," he said. "Whether it turns into a theme depends on Iran's reaction and... the US response."
German bunds and United States Treasuries - the world's benchmark government bonds and typically seen as the safest assets - caught a bid too. US 10-year yields, which move inversely to prices, fell five basis points to a three-week low; German bund yields dropped away from their seven-month highs at the start of the week.
The focus on geopolitics meant markets paid little attention to stronger-than-expected data from France, where inflation rose 1.6 per cent year on year last month. German inflation figures were also higher, though unemployment rose more than expected, data showed.
Gold, the other traditional refuge for risk-averse investors, rose 1 per cent to a four-month high of US$1,543.