Geopolitical tensions in the Middle East have caused investors to become more cautious in the market. As news of Israel’s attack on Iran spread, initial strong price reactions subsided as the morning progressed. The impact of the attack is still uncertain, with Iranian authorities downplaying its effects.
In response to the news, demand for safe haven investments surged, leading to changes in stock and bond prices. Stock prices fell while government bond prices rose, resulting in a decrease in interest rates. For example, Germany’s ten-year government bond interest rate fell by two percentage points to 2.47 percent. The United States also saw a significant drop in long-term interest rates.
After about half an hour of trading, the Stoxx 600 index was down 0.7 percent, with industrial stocks taking the hardest hit. However, grocery company stocks were up 0.8 percent, indicating a flight to safety in the market. L’Oreal’s better-than-expected results also boosted its share price by 4.8 percent.
According to Kathleen Brooks, director of research at XTB, the limited impact of the attack has brought relief to the market. However, she warned that risk premiums could rise across asset classes if uncertainty persists