The recent attack by Israel on Iran has caused heightened tension in the Middle East, leading investors to be more cautious in the market. Initially, there were strong price reactions to the news, but as the morning progressed, details about the impact of the attack became more uncertain. Iranian authorities have downplayed the effects of the attack.
In response to the news, demand for safe haven investments surged in the morning, resulting in changes in stock and bond prices. Stock prices fell while government bond prices rose, leading to a decrease in interest rates. For example, Germany’s ten-year government bond interest rate fell by two percentage points to 2.47 percent. The United States also saw a significant drop in long-term interest rates.
After about half an hour of trading, the Stoxx 600 index was down 0.7 percent, with industrial stocks taking the hardest hit. However, grocery company stocks were up 0.8 percent, indicating a flight to safety in the market. L’Oreal’s better-than-expected results also boosted its share price by 4.8 percent.
According to Kathleen Brooks, director of research at XTB, the limited impact of the attack has brought relief to the market. However, she warned that risk premiums could rise across asset classes if uncertainty persists. European markets are facing a third consecutive week of decline due to ongoing geopolitical tensions in the Middle East.
Investors have become more cautious as tensions escalate between Israel and Iran in