International oil prices fell below $70 per barrel for the first time in over a year and four months. This was due to amplified concerns following the bankruptcy of the U.S. Silicon Valley Bank (SVB), which triggered fears of a 'systemic crisis' in financial markets, compounded by the shock from Credit Suisse (CS). As a result, the preference for safe-haven assets increased, leading to a rally in representative safe assets such as gold and the dollar.
On the 15th (local time) at the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil for April delivery closed at $67.61 per barrel, down $3.72 (5.22%) from the previous session. This is the lowest closing price since December 3, 2021. It is also the first time since 2021 that prices have fallen below $70 per barrel. The May Brent crude futures on the London ICE Futures Exchange also plunged nearly 5%, retreating to the $73 per barrel range.
This is analyzed to be due to a sharp contraction in investor sentiment following the consecutive bankruptcies of U.S. regional banks such as SVB and Signature Bank, which was then followed by crisis rumors surrounding the major European bank CS. The Saudi National Bank, the largest shareholder of CS, announced that it could no longer provide additional funding, leading to a sell-off in the market amid concerns over liquidity crises. The overlapping fears of a potential global financial risk spread, recession outlook, and the impact of a strong dollar pulled down oil prices, a representative risky asset.
On the other hand, gold prices, a safe-haven asset, surged to a six-week high. April delivery gold on the New York Commodity Exchange closed at $1,931.30 per ounce, up 1.1% ($20.40). This is the highest level since March 1. The dollar also showed a rally. The Dollar Index, which measures the value of the dollar against six major currencies, rose more than 1% to around 104.6. U.S. Treasury yields also fell across the board in the New York bond market. The 10-year U.S. Treasury yield dropped to 3.47%, and the 2-year yield fell to around 3.91%. The decline in bond yields indicates a rise in bond prices, which are considered safe-haven assets.
Amid concerns over financial risks, warnings have emerged that the global economy may face a recession. Goldman Sachs lowered its forecast for U.S. fourth-quarter growth, predicting that instability in the banking sector could lead to tighter lending and reduce overall demand. Signals also confirmed that Americans are cutting back on consumption due to the Federal Reserve's high-intensity tightening that has continued since last year. U.S. retail sales for February, released on the same day, decreased by 0.4% compared to the previous month. Retail sales are considered a pillar accounting for two-thirds of the U.S. real economy and a comprehensive indicator of economic health.
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