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Oil Prices Spike Amid Iran Retaliation as Forex Market Calms

Updated on
  • Crude oil prices remain at a high after Iranian missile attack
  • USD forex trading markets have generally regained stability
  • Markets remain poised for Presidential statement on Wednesday

The beginning of 2020 has seen a speedy escalation of geopolitical tensions between the U.S and Iran. Marked by the assassination of miltary leader Qasem Soleimani on January 3rd by the United States in Iraq, the latest twist in the tale just hours ago has seen Iranian retaliation. This has come in the form of a targeted attack on 2 air bases in Iraq which are home to American troops. This briefly rocked the USD forex market and has impacted global oil prices significantly.

Surge in oil prices to record highs

During early trading, the prices of crude oil increased sharply to around the $69 mark at the time of writing. This represents their highest point in more than six-months and should be widely expected given the importance of the region when it comes to the global oil industry and markets.

The fear within markets is that one of the busiest oil shipping passages in the world, the Strait of Hormuz, could be disrupted if the current situation between the two nations continues to deteriorate. Market uncertainty is also not helped by the fact that the next moves of the U.S. in relation to today’s missile strike remain unknown.

USD/JPY and forex market beginning to regain composure 

The global forex market also felt reverberations from the Iranian retaliation earlier today. In particular the safe-haven status of the Japanese Yen, well-known among forex margin traders, rang true yet again as many engaged in a flood of risk aversion trading in the immediate aftermath of the missile attack. This led the pair to trade at 3-month lows below 108.00.

At the present moment, traders appear to have calmed and this market has returned to the mid-108 range. The gold market, another safe-haven favorite, has also dropped back slightly but is still holding on to some of it’s gains from earlier in the day. Major forex currency pairs and indices from around the world are also licking their wounds and making a slow recovery during the early trading across Europe. The Euro, British Pound, and Swiss Franc have all found their composure and return to a somewhat normal trading range for the day.

Next moves awaited with anticipation around the world

Many commentators have referred to this as the biggest outside threat and test of President Trump’s reign to date. The fact that no immediate announcement was made in haste, may have done something to help the global markets return to calmer waters.

With the promise of a Wednesday morning US Eastern Time announcement to address the crisis though, is sure to bring with it another rollercoaster day and an amount of uncertainty moving toward the weekend. Considering the current climate and decision making process, there is no educated way to guess how that announcement may play out and what it will bring for the forex market and the nation.

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Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.