The tense situation in the Middle East has caused investors to exercise caution in the market. Initially, there were strong reactions to the news of Israel’s attack on Iran, but as the day progressed, the impact of the attack became less clear. According to Iranian authorities, the effects of the attack are being downplayed.
In response to this news, demand for safe haven investments surged in the morning, 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 brunt of it. 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, while there was relief after the limited impact of Israel’s attack on Iran was seen by some investors as positive news for markets worldwide; uncertainty persists and risk premiums could rise across asset classes if tensions continue to escalate
