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Markets tremble with fear of war

Markets tremble with fear of war

created Daniel Kostecki18 February 2022

Marking volatility in the markets of the past days Forex, stocks, bonds and commodities seem to justify the incoming, one after another, extremely contradictory information that the conflict in eastern Europe is escalating and then that it is de-escalating.

The news from the front seems to have an impact on the stock markets, which are trying to stabilize after the disastrous beginning of the year.

Profit day after downturn

The Dow Jones fell almost 1,8% on Thursday, the biggest daily decline since November. S & P 500 lost more than 2 percent, and Nasdaq almost 2,9 percent, testing around 14000 points One of the factors prompting investors to sell the shares may have been the statements by the President of the United States that the threat of Russia's invasion of Ukraine remains high and that Russia has not withdrawn its troops.

This morning, US index futures seem to be recovering from losses after US Secretary of State Antony Blinken has agreed to meet Russian Foreign Minister Sergei Lavrov in Europe next week. This may offer hope for a diplomatic solution to the conflict between East and West. Until the day of the meeting, however, the uncertainty may remain relatively high.

One million barrels more crude oil per day?

In the oil market, we can observe the potentially first downturn week since early December. The price of a barrel WTI oil dropped to around $ 91 as the chances of an agreement with Iran increased. Hopes for a settlement seem to outweigh concerns about possible disruptions to oil supplies as a result of a possible conflict.

Reuters said the agreement to revive the 2015 Iran nuclear deal is taking shape, and the draft agreement sets out a sequence of steps that will eventually grant sanction waivers for oil and restore around 1 million barrels of oil per day.

The capital flows to a safe haven

Among the raw materials, rising gold prices may attract attention. Today an ounce of gold is nearly USD 1900, the highest in 8 months. Investors' concerns about the armed conflict between Russia and Ukraine and its consequences may contribute to the price increases. The risk of such a scenario may result in capital flowing towards the safe haven of gold.

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About the Author
Daniel Kostecki
Chief Analyst of CMC Markets Polska. Privately on the capital market since 2007, and on the Forex market since 2010.