International Oil Prices Surge Over 4%
Gold Prices Reach Highest Since 2013
Asian Stock Markets Plunge Together... Japanese Stocks Fall 2%
Won-Dollar Exchange Rate Soars to 1177 Won Level
[Asia Economy Reporters Eunbyeol Kim, Boryeong Geum] The news that Iran launched a missile attack on a U.S. military base in Iraq has sent shockwaves through global financial markets. Earlier this week, the prevailing sentiment among investors was to "wait and see." However, as soon as the funeral proceedings for Qasem Soleimani, commander of the Quds Force of the Iranian Revolutionary Guard Corps, who was killed in a U.S. airstrike, concluded, the attacks began, raising fears among investors that retaliatory measures are now in full swing. Oil prices surged sharply, and a flight to safe-haven assets reemerged.
As of 9:47 a.m. on the 8th (Korean time), futures for the Dow Jones Industrial Average in the U.S. New York Stock Exchange were down more than 400 points. CNBC reported on the 8th (local time) that the Dow was expected to drop about 432 points shortly after the New York market opened. Futures for the S&P 500 and Nasdaq indices were also down by approximately 100 points.
Notably, international oil prices have risen more than 4%. West Texas Intermediate (WTI) crude oil futures were trading around $65 per barrel, up about 4.5% as of the morning. The flight to safe-haven assets continued, with spot gold prices trading at $1,608.42 per ounce as of 9:25 a.m. This is the first time since 2013 that gold prices have exceeded $1,600.
Asian stock markets also plunged simultaneously. In Tokyo, the Nikkei 225 index fell more than 2%. The Japanese yen, considered a safe-haven currency, strengthened. The yen-dollar exchange rate traded around 107 yen, down about 0.5% from the previous day. China's Shanghai Composite Index dropped 0.34%, and Hong Kong's Hang Seng Index fell more than 1.5%.
As of 10:05 a.m., the KOSPI index stood at 2,151.29, down 24.25 points (1.11%) from the previous close. During the session, the 2,150 level was briefly breached, falling to as low as 2,141.78, threatening the 2,140 level as well. The KOSDAQ index also fell more than 3%. The won-dollar exchange rate was at 1,177 won as of 10:26 a.m. The Bank of Korea will hold a Monetary and Financial Measures Meeting at 2 p.m. today, chaired by Deputy Governor Yoon Myeon-sik. A Bank of Korea official stated, "Given the escalating military tensions between the U.S. and Iran, we will closely monitor market conditions for the time being."
Experts are paying close attention to the sharp rise in oil prices today. Oh Jung-seok, head of the International Finance Center, expressed concern, saying, "Usually, international oil prices do not show significant movement during the opening hours of Asian financial markets, but today they have surged sharply from the start." He added, "Currently, the sweet spot for WTI is between $55 and $65 per barrel, so from this perspective, it is not too risky, but the problem is that it is difficult to predict how much further oil prices will rise." If investor anxiety intensifies, speculative buying could increase, which in turn could push oil prices even higher.
The sharp rise in oil prices is expected to impact countries highly dependent on imported energy, such as China and Europe, the world's largest oil importers. Rising oil prices could reduce household income and spending and accelerate inflation. If China's economic growth rate falls more than expected, it could have direct and indirect effects on South Korea as well.
However, there is also a forecast that oil prices will remain within a range despite specific issues, due to increased shale oil production in the U.S., and will not surge as sharply as during past oil shocks. When Saudi Arabia's state-owned oil company Aramco's facilities were attacked last September, oil prices surged 20% in one day but recovered within about two weeks. If the situation with Iran escalates, U.S. President Donald Trump may approve the release of strategic petroleum reserves (SPR).
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