The tightened situation in the Middle East has reduced the desire to take risks in the market. However, the strongest price reactions have calmed down as the morning progresses.
According to media reports, Israel has carried out an attack on Iran on Friday morning. Even in the morning, the information about the effects of the strike or strikes is uncertain. According to the comments of the Iranian authorities, the effects would have been minor.
In the market, the demand for safe harbor investments rose rapidly in the morning, but the price changes have also leveled off. The effects are now most clearly visible as a fall in stock prices and a rise in government bond prices, i.e. a fall in interest rates. For example, the interest rate on Germany’s ten-year government bond fell by two percentage points to 2.47 percent. In the morning, the long-term interest rate of the United States briefly dived over ten interest points.
After about half an hour of trading, the Stoxx 600 index was down 0.7 percent. Industrial stocks were the hardest hit by more than 1.5 percent. The desire for a safe harbor is visible in the market in that the shares of grocery companies were up 0.8 percent.
Grocery companies were also supported L’Oreal better than expected result. The company’s share price was up 4.8 percent.
“Now the attack seems limited. This has brought relief to the market. On the other hand, risk premiums may rise across asset classes are likely to rise if uncertainty continues,” Kathleen Brooks, director of research at XTB, told Bloomberg.
European markets are entering a third consecutive week of decline.