Oil prices dip but gold climbs as Israel weighs response to Iran’s attack

Hong Kong CNNGold prices rose while Asian stocks mostly fell on Monday, as rising geopolitical tensions in the Middle East spurred demand for safe haven investments after Iran launched an unprecedented attack on Israel.

Hong Kong’s Hang Seng Index dropped 0.8% in mid-afternoon trade. Japan’s Nikkei 225 closed 0.7% lower, while South Korea’s Kospi ended down 0.4%. But China’s Shanghai Composite Index finished 1.2% higher.

Spot gold was up 0.5% at $2,355 per ounce on Monday. It had hit an all-time high of $2,431 per ounce on Friday because of fears of a potential attack by Iran on Israel. So far this year, bullion has surged 18%.

US gold futures traded flat on Monday. They are up 15% this year.

Oil prices had settled higher on Friday in anticipation of retaliatory action from Iran, hitting their highest levels since October.

They retreated slightly during Asian trading hours on Monday, as traders curtailed the geopolitical risk premium after the attack caused only minor damage, according to Israeli military officials.

Still, US crude futures have risen 6.7% this year. Brent crude, the global oil benchmark, has surged more than 10%.

“Heightened tensions in the Middle East amid a worsening geopolitical backdrop kept commodity markets on edge,” analysts from ANZ said in a research report on Monday.

Iran’s attack is likely to raise concerns of a possible disruption to oil supply, they said.

“The extent of that risk will likely be determined by the reaction of Israel’s government,” the analysts added.

The Middle East was plunged into uncharted waters after Iran launched scores of missiles toward Israel late Saturday. Israel’s military said “99%” of the more than 300 projectiles were intercepted by Israel and its partners.

Tehran’s attack was anticipated following a suspected Israeli strike on an Iranian diplomatic complex in Syria earlier this month.

Before Iran’s attack, US stocks ended Friday sharply lower, as Wall Street worried about escalating tension in the Middle East.

US futures are cautiously higher after US President Joe Biden and his national security team, seeking to contain the risk of a wider regional war, told their counterparts the US will not participate in any counter-strike against Iran.

Dow futures rose 150 points, or 0.4%, in Asian hours on Monday. S&P 500 and Nasdaq futures were both up 0.5%.