Stocks Slide on Tensions in the Middle East as Hopes of Containing the Crisis Pare Losses - Latest Global News

Stocks Slide on Tensions in the Middle East as Hopes of Containing the Crisis Pare Losses

Stock markets in Australia, Japan, Hong Kong, Singapore and South Korea fall after Iran’s attack on Israel.

Stocks slumped in Asia after Iran ratcheted up tensions in the Middle East over the weekend by firing a barrage of missiles and drones at Israel, heightening fears of a wider conflict in the volatile region.

But while Israel described the attack – which Tehran said was a response to an earlier attack on its Syrian embassy – as an escalation of hostilities, analysts among traders expressed hope that the crisis could be contained.

This sense of optimism helped drive oil prices lower.

The bombing of more than 300 ballistic and cruise missiles and attack drones on Saturday – most of which were defeated by anti-aircraft missiles – added to concerns about the outlook for U.S. interest rates after inflation and jobs data beat forecasts.

Iran told the United Nations the attack was a “legitimate” defensive response to the attack in Damascus on April 1 that killed seven members of Tehran’s Revolutionary Guard, including two generals.

On social media, it added that “the matter can be considered closed” but warned that “if the Israeli regime makes another mistake, Iran’s response will be significantly harsher.”

Israeli military spokesman Daniel Hagari said it was “a serious and dangerous escalation.”

But experts said the limited scope of the attack showed that Iran wanted to use its attack to demonstrate strength without leading to a conflict.

Meanwhile, US President Joe Biden is said to have warned Israeli Prime Minister Benjamin Netanyahu to “achieve victory” and refrain from a counterattack.

Still, Saxo’s Redmond Wong said: “All eyes remain on whether there will be a response from Israel and markets are likely to be volatile the next day on any geopolitical headlines.”

Asian markets mostly fell on Monday, although they pared their initial big losses.

Tokyo, Singapore, Mumbai, Taipei and Manila lost at least 1 percent, while Hong Kong, Seoul, Sydney and Wellington also saw losses.

Shanghai rose more than 1 percent after China unveiled new market regulatory measures on Friday that could improve the country’s long-term performance, according to an analyst.

U.S. futures rose after falling sharply on Friday as investors nervously headed into the weekend.

“The market’s muted reaction is likely due to the extremely complex market sentiment at this time,” said Hebe Chen of IG Group.

“Market participants are certainly not giving up hope that last weekend’s events were just a one-off, while at the same time holding their breath about what might happen next.”

As concerns about escalation ease for now, oil prices fell, although observers warned they could rise back above $100 if the crisis worsens.

“This war could move down the escalation ladder if the Israeli government follows the White House’s advice and refrains from retaliating,” said Helima Croft of RBC Capital Markets.

Overall risk-off sentiment sent the U.S. dollar higher relative to its main rivals, while muted hopes of interest rate cuts in the U.S. helped it hit a new 34-year high against the yen, putting Japanese officials in the spotlight after they had declared that they were prepared to intervene to support their currency.

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