Macroscope | Markets aren’t losing any sleep over the US, Iran and oil yet – the trade war is still more of a worry

Justifiable fears about a full-scale US-Iran conflict gave markets the jitters, but they have quickly calmed down. For investors, it’s key to understand whether a particular event will have a sustained impact on the global economy and corporate performance

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Thousands attend a funeral procession in Tehran on January 6 for Iranian general Qassem Soleimani, who was killed in an American drone strike. Photo: Reuters

Published: 5:00pm, 17 Jan 2020Updated: 10:31pm, 17 Jan 2020

The abrupt escalation in political tension between the US and Iran briefly rattled markets, at a time when global investors were feeling upbeat about the trade war and Brexit.

Trade negotiations between the United States and China have now led to the signing of the phase one deal, and in Britain, the Withdrawal Agreement Bill is heading through Parliament after the Conservative Party’s resounding general election victory.

Although both events could still yield more drama in the months ahead, markets took solace in knowing that we have at least avoided the worst.

With the volatile political situation in the Middle East appearing to be the latest source of unease, investors need to think rationally about the economic impact of the circumstances.

On January 3, the assassination of Iranian general Qassem Soleimani in a US military drone attack set off another round of tension in the Middle East. Oil prices quickly shot up, with Brent crude surging above US$68 per barrel, and there was a stock market correction. However, these initial reactions soon reversed, with the S&P 500 still maintaining a year-to-date gain.

Despite justifiable fears about a full-scale conflict between the US and Iran, markets now seem surprisingly calm. If we look back on recent geopolitical events, it’s clear that doomsayers don’t hold markets’ attention for long. The key is to understand whether a particular event will have a sustained impact on the global economy and corporate performance.

.css-1m2rp1p{color:#34b8b5;}Macroscope | Markets aren’t losing any sleep over the US, Iran and oil yet – the trade war is still more of a worry

Macroscope | Markets aren’t losing any sleep over the US, Iran and oil yet – the trade war is still more of a worry