Largely following on from yesterday’s trends, market indices struggled to recover from the tensions in the Gulf and ensuing oil price hike. As if markets hadn’t taken more than their fair share of beatings and uncertainty, the jump in Brent Crude not only makes day-to-day activities more costly (the arbitrary case) but the events in the Gulf are yet to be resolved, and will thus weigh in already frigid market sentiment. If any illustration of this fact was needed, there was an almost knee-jerk reaction from investors, with precious metals gaining almost immediately after the developments in the oil sector.

Oil and today’s movements

Speaking on the behaviour of indices following the beginning of trading, Spreadex Financial Analyst Connor Campbell commented, “As Brent Crude let rip, the global markets remained subsumed in red on Monday, fearful over the implications of oil’s rise.” “Though not quite back at the $72 per barrel-nearing levels it initially shot to, Brent Crude only gained in confidence as the day went on, climbing 10.5% to cross $66.50 after reports came out that Iran had seized a UAE oil tanker. This, obviously, was a tasty treat for BP and Shell, who bounced 4.6% and 2.6% respectively following the attack on the facility in Saudi Arabia.” “However, the Western indices weren’t quite as pleased. Also dealing with some downbeat data out of China, the likes of the DAX, CAC and Dow all fretted over what these soaring oil prices will mean for growth; ditto the potential for further destabilisation in the region.” “The German and French bourses fell 0.7% apiece, while the Dow dropped 100 points to loiter just above 27100. Benefiting from its sizeable oil stocks, the FTSE’s losses in comparison were pretty manageable; the UK index slipped 0.3%, just about taking it under 7350 but off of the day’s lows.” “With investors eyeing up safe havens – gold rose 0.8% – the dollar was one of the day’s other notable winners. Against both the pound and euro alike the greenback climbed half a percent, knocking cable below $1.2412 while kicking the single currency back to $1.1013.” “Given the enormous response from Brent Crude, investors are going to be on high alert for any developments overnight that’ll dictate whether or not the black stuff can keep gushing higher all the way through to Tuesday morning.”

Precious metals are the golden ticket

With no decisive movements, but a host of indications and uncertainty prevailing, investors are preparing for what is more commonly being accepted as the ‘impending doom’. Whether true or not, many have heard enough chatter around a dreaded ‘recession’ and too few encouraging updates to the contrary. They are perhaps only being prudent, then, by looking increasingly towards either shorts (market or options) and deep out of the money puts, or buying into precious metals. As stated by Vanguard Capital AG in their last monthly summary, “The main winners in this environment have been long duration bonds and precious metals.” “[…] Moving forwards, we think a core holding in precious metals will be very important for portfolios over the next decade and investors who haven’t allocated into the asset class need to pay close attention. Clearly, the recent run up since July has been extreme and so waiting for pullbacks to buy is the preferred strategy from these levels.” Vanguard added that they expected some room for risk assets to rally during September but that this would be contingent on the Fed implementing more accommodative policy; which isn’t wholly likely, considering Powell’s desire to maintain some wiggle room for (even) more gloomy times. As such, inverse risk assets such as gold continue to rally. Elsewhere in markets and macro economic news, there have been updates from; ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Jo Johnson quitting, Hilary Benn’s Brexit delay bill, Parliament being prorogued, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).