Middle East Tensions Rise: 5 Big Gainers

Following the siege of the U.S. Embassy compound in Baghdad, the United States retaliated by deploying about 750 U.S. soldiers in the Middle East. Further on Jan 3, Iraq’s Hashed al-Shaabi paramilitary force confirmed that the head of Iran’s Quds Force, Qasem Soleimani, was killed in an airstrike on Baghdad’s international airport, following direct orders from President Donald Trump.

Iraq and Iran have been in conflict since 1980 on several issues including, land, oil and waterways. However, America had provided support to Ba'athist Iraq during the Iran-Iraq War including billion dollars' worth of economic aid, technology, military intelligence, and special operations training. Nevertheless, Iran has had no formal diplomatic relationship with the United States since 1980 and the death of Soleimani is likely to turn the proxy war into a direct one.

As this war intensifies, it will lead to a shutdown of oil production in the Middle East, disrupting the stock market heavily. However, this will drive oil prices north and increase demand for safe-haven assets like gold.

Oil Prices Spike

Iran, an oil-rich country of the Persian Gulf, holds a significant position in the Organization of the Petroleum Exporting Countries (OPEC). It was one of the five countries involved in signing of the OPEC agreement in September 1960. Notably, any tension in the Middle East disrupts production of oil, eventually leading to the rise in crude price.

In 2019, crude prices surged to a record high in September on account of an attack on Saudi Arabia’s Aramco facilities, which cut the world's top exporter’s output by half for nearly a week. Earlier in 2019, blasts on tankers in the Gulf had also led to a rally in oil price. President Trump blamed Iran for this attack, and geopolitical tensions got aggravated.

Brent crude futures jumped 4.4% to $69.16 and U.S. West Texas Intermediate (WTI) crude futures rose 4.3% to $63.84, post the news of America’s attack on Baghdad’s international airport.

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