Fears of US-Iran clash send crude, gold prices climbing

LONDON - Oil and gold prices surged on Monday following the US assassination of top Iranian commander Qasem Soleimani as investors flocked to safer investments faced with a disruption to global oil supplies.

Brent crude oil prices, the international benchmark for crude, extended beyond $70 a barrel and gold peaked at $1,588 per ounce, a level not seen since April 2013.

Washington had warned of a ‘heightened risk’ of strikes on military and energy facilities in Saudi Arabia, with President Trump threatening ‘major retaliation’ if Iran decided to avenge Friday’s killing.

This triggered a sell-off in stocks and the spike in crude with a huge upswing in the demand for gold, which is considered a safer investment in times of uncertainty.

Meanwhile, American, European and Asian markets tanked in response to news of Soleimani’s death by US drone strike in Baghdad.

"Today's ... losses extend the stock market weakness that began on Friday when a US airstrike killed Iran's top Military Commander Qasem Soleimani," said London Capital Group analyst Jasper Lawler.

"The prospect of Iran avenging the killing of Soleimani and then a retaliation from the US is keeping de-escalation hopes at bay.

"We would expect the impact of these Middle Eastern tensions to be more durable in commodities markets than in equities," he said.

Investor optimism quashed

News of the assassination has rocked investors who were optimistic as Beijing and Washington were on the verge of signing their long anticipated mini trade deal next week.

Crude oil prices rallied and data indicated a slight improvement in the global economy, good news for oil investors who have suffered tremendously following attacks on Saudi Arabian facilities in September, which caused the world’s largest producer to briefly half output.

But this latest uptick in tensions casts a massive cloud over any optimism at the start of 2020 as the security situation in the region that supplies much of the world’s petroleum rapidly deteriorates.