Crude oil is getting more expensive. Eyes of investors facing the Middle East.

The enthusiastic mood associated with the beginning of the new year and the clear situation in world politics were disturbed by yesterday's events in the Middle East. The vigorous reaction of currencies and indices was caused by US actions in Baghdad. As a reminder, US troops launched a rocket attack on one of Iran's major military commanders. According to the US, Kassim Sulejmani was involved in planning attacks on US officials. He presided over the elite army unit that was part of the Iranian Revolutionary Guard and, according to Donald Trump, he was a real threat to important American personalities.

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Oil in the crosshair

Yesterday's events rocked the financial markets. Oil felt it the most, rising by nearly 3%. During this time, indices erased recent increases, and metals also moved south (except gold). The reaction was undoubtedly quite violent, but it remains to be seen how the situation will develop after the weekend. Perhaps the new week will bring us a strong correction of Friday's moves. However, I would approach this hypothesis cautiously because it may be just the beginning of an escalation of a major conflict.

Chart oil, H1 interval. Source: xNUMX XTB xStation

Iran has already announced revenge. For now, we can only guess how it will fulfill its announcements. The scenario about a possible solution to the problem by force seems to be doubtful. The country is struggling with strict economic difficulties. On the other hand, there is much less doubt about oil retaliation. The Strait of Hormuz would play a key role, through which a large part of crude oil is transported daily (including to the USA, among others).

Oil - Will It Be Expensive?

I think that for the time being it is worth refraining from the diversion on a dramatic rise in oil prices. However, one should realistically take into account the fact that Iran's retaliation may be centered around black gold. Expensive barrels would undoubtedly lead to higher costs for the vast majority of enterprises, which would slow down global economic growth. Today the first forecasts came out, whose headlines "screamed" by PLN 6,00 per liter of gasoline. Undoubtedly, the hot situation around black gold will have a negative impact on average consumers, due to increases in the energy and transport sectors.

According to general estimates, approximately 21 million barrels of oil flow daily through the Strait of Hormuz. They account for approximately 20% of all global demand for black gold. It is not difficult to guess how any attempts to intervene in, for example, oil infrastructure or seizure of tankers would affect the valuation of oil. Undoubtedly, the paralysis that would follow such a move would significantly hit global fuel producers. Among them, apart from Saudi Arabia, Kuwait and Iraq, there are mainly the United States.

Hard USA rhetoric

Donald Trump is known for his tenacious attitude and maintaining his opinion at all costs. In the event of any armed intervention by Iran, we would undoubtedly have to deal with the armed actions of external states. In addition, one of the favorite tools of the President of the United States are all kinds of sanctions that he can use when trying to block the strait by the Iranian authorities.

US500 chart (S&P 500), H4 interval. Source: xNUMX XTB xStation

After an intense reaction of the S & P500, the index recovered at least half of its losses in the following hours. The session did not look so good on the Warsaw Stock Exchange, where the WIG20 lost almost 1,5% yesterday.

Emerging markets currencies are losing

Based on yesterday's events, it was losing (for the second day in a row) the South African rand against the dollar. Again, uncertain situation in global markets will gradually build investors' aversion to assets with greater risk exposure. Looking technically at the USD / ZAR situation, there are no indications that the appreciation of the dollar for several days will end soon.

USD / ZAR chart, H1 interval. Source: xNUMX XTB xStation

About the increase in geopolitical risk and the withdrawal of investors from more risky markets, confirmation can be found in the valuation of gold, which was rising on the basis of events from the Middle East. Precious metal ends the eighth growth session in a row.