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Dow, S&P, and NASDAQ in the red as Iran prepares to launch missile against Israel

Journalist: John Choong (Head of Markets and Research), Newspage

ended 02. October 2024

Significant downside risks to equities have come into play as Iran prepares to launch a missile attack on Israel in retaliation to the latter's attack on Hizbollah in Lebanon. Fears of an all-out war in the Middle East have escalated, hitting US equities. The Dow Jones is down 0.6%, S&P down 1.2%, and the NASDAQ down 1.9%.

On the back of these escalations, the US dollar index has spiked to 0.5% to 101.28. The pound is losing value, sliding against all major currencies. GBP/USD plunges 0.9% to $1.3250, while GBP/JPY has lost a shocking 1.2%. GBP/CAD is also hit with a 1.1% drop.

However, commodities are having a hay day. Brent Crude futures have spiked 5.8%, while UK gas futures rising to £97.45, a year-to-date high. And as ever, gold is up 1.2% and is in touching distance of yet another all-time high.

Newspage is looking for any thoughts you might have on the current tensions in the Middle East, what this could spell for equities as well as other asset classes/commodities, and what risks this could mean for inflation.

3 responses from the Newspage community

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Editor
Gabriel McKeown
Head of Macroeconomics at The Sad Rabbit Newsletter
As the world teeters on the brink of a geopolitical abyss, the economic outlook remains precarious. Israel's commencement of ground raids in southern Lebanon marks a significant escalation despite international calls for de-escalation. This move, coupled with reports of Iran preparing a missile attack on Israel, threatens to ignite a wider regional conflagration, with the risk of destabilising the Middle Eastern region. A wider war could lead to significant disruptions, affecting global oil prices and trade routes. Oil prices have spiked, potentially reigniting inflationary pressures as central banks contemplate monetary easing. Additionally, the VIX index, the market’s fear gauge, has surged, cementing the growing concern amongst investors. This uncertainty will drive investors to safe-haven assets and likely push gold to new all-time highs. As tensions reach a fever pitch, the world watches with bated breath as a single misstep could plunge the global economy into uncharted waters.
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Editor
David Belle
Founder and Trader at Fink Money
Ideally what we want to look at here is the volatility markets, as they tend to tell all. The reasons for the major indices slipping these days tend to be down to something going wrong in the volatility complex. If we look at how the VIX has traded throughout today, it’s popped to just sub-21, and has stuck around there.

Whilst we might see a bit of downside, we're of the view that this won't be anything like the sell-off in early August. The current reaction on the VIX is more akin to a Fed day than anything else. Thus, our best shout is that we see a maximum low of 5,685 on the S&P 500 e-mini futures, which aligns with the 20-day moving average.

After all, we know what happened when Iran last announced and launched their strike, and that amounted to ‘nish’.
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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
The current geopolitical situation in the Middle East is deeply concerning for several reasons, including its economic impact. Rising energy and transportation costs, along with increased risk and volatility, could hinder the ongoing economic recovery we've been experiencing due to declining inflation. Financial markets do not like uncertainty and that seems unavoidable for now.