Market update: All eyes on Washington after the tanker attacks, safe havens rally from Gold to Dollar

14 Jun

by Mihály Tatár

 

Good Morning!

 

  • Those oil traders who were in near-panic in their long positions got incredibly lucky with the attacks on two oil tankers on Thursday (that, or sea mines are now in commercial circulation, as many joked), as prices jumped (WTI 52.40, Brent 61.70 USD), with the market frantically trying to figure out if a war risk premium should be in place or not. (The US since then announced that it is blaming Iran with the attack, based on a video recording and because of the sophistication of the operations. Iran denied any involvement, but the optics weren’t good since Japanese Prime Minister Abe was just visiting Iran for a Trump-endorsed dialoge, where he got an insulting rebuke from Iran’s Supreme Leader Ayatollah Ali Khamenei. Many also noted the interesting coincidence that one of the attacked tankers was the Japanase- operated Kokuka Courageous. While strategists seemed to be taken by surprise (’the attacks put upward pressure on the probability of a US-Iran conflict, currently 30%’ – in analyst speak, this means they have no clue what will happen), and many websites talked about a false flag attack /CIA, Mossad, Saudis, maybe Steve Bannon was the frogman and Nigel Farage handled the explosives/. Washington itself seemed to be odds what to do now and uncertainly talked about giving’naval escorts to commercial ships travelling through the Strait of Hormuz’. In my personal opinion, safe movement of ships, especially oil tankers, is so crucial for a superpower’s standing that the US is simply not in a position to not to answer eventually. Regardless who did it yesterday, an example must be set, or else all the Houthis and the cartels of the world will learn that anything  goes.) Needless to say, the safe-haven Dollar strengthened (EURUSD 1.1270- despite the market now talking about a Fed rate cut as soon as July and another one in September), and money fled into Gold and US bonds (Gold 1350 USD, US 10Y yield 2.08%). Interestingly, stock markets weren’t that much disturbed (SPX +0.41%, Nasdaq +0.57%, DAX +0.44%, Nikkei +0.32%, Shanghai -0.20%), either because investors didn’t think anything serious would happen or because so many were relieved that oil didn’t crash under 50 USD, taking energy stocks and bonds with it.

 

 

Have a nice day,

Mihály

 

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