The stock markets have sharply fallen in early trading by more than 1.5% as crude oil continues to fall more than a fifth this year over increasing supply from Iran and concerns over slowing demand.
Currently, Brent crude is at $29.61 and the West Texas Intermediate is down to $29.51.
As a result, HSBC and Goldman Sachs have slashed rating of oil majors. HSBC has said that the signs of distress across the sector are rising and that it expects further bankruptcies, write-offs and restructurings.
Chief economist as asset manager GAM, Larry Hatheway, has commented;
“Falling oil prices have historically been positive for the world economy, given the redistribution of purchasing power from producers to consumers. This time, however, markets have chosen to focus on the immediately negative effects of lower oil prices without looking ahead to potential positive outcomes,”
Another reason behind tumbling stocks can also be seen in the falling of Chinese markets, with China’s Shanghai Composite index sinking more than 6%
This effect on the markets has left investors looking elsewhere to invest. Gold is looking promising, with the precious metal rallying to its highest levels since November.