Middle East Tensions Go from Boil to Simmer01/08/2020

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Financial markets are once again shaking off rising tensions in the Middle East. After months of provocations against the U.S. and American allies by Iran, the U.S. responded with a drone strike killing a high-ranking Iranian general in Iraq last week. Thousands of Iranians took to the street to show support for their fallen general, which in scale was second only to the funeral in 1989 of Ayatollah Khomeini, the founder of the Islamic revolution. Iran vowed retaliation against the U.S., which had market participants around the world watching very closely. President Trump tweeted an attack on U.S. interests would be met with disproportional force, which could involve taking out Iran’s main source of revenue, their oil-producing capabilities.

Iran’s response ended up being missile attacks near U.S. bases, resulting in little damage and no harm to soldiers. The response seemed more symbolic than punitive, which allowed President Trump to de-escalate the situation. Stock futures were trading down more than 1% overnight and oil was up over 4%, but after the reports of damage or lack thereof came in, stock futures turned positive and oil gains receded. The tech-heavy NASDAQ opened the day hitting record levels.

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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.

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