Risk factors returned earlier this week on the financial markets, starting with the geopolitical tensions in the Middle East, which caused oil prices to skyrocket by nearly 15% on Monday. In addition, signs of economic slowdown are increasing in China and the United States again threaten to overtax European imported goods.
At the close, the Dow Jones index dropped 0.52% to 27,076 points, ending a series of 8 consecutive hikes, which brought it Friday to only 0.5% of its last record high in July. The broad S & P 500 index fell 0.31% to 2.997 pts, while the Nasdaq Composite, rich in technology and biotechnology stocks, dropped 0.28% to 8.153 pts. In Europe, the EuroStoxx 50 finished down 0.89%, while the CAC 40 lost 0.94%.
On the currency markets, the dollar rose Monday night, acting as a safe haven, as well as US and German government bonds, bringing down interest rates. The dollar index gained 0.36% to 98.51 points, while the euro dropped 0.65% to $1.1002 against the greenback. The 10-year T-Bond yield fell 5 basis points to 1.85% and the German Bund of the same maturity fell back to -0.48% (-3 bps).
This Monday, all eyes were turned to the oil markets, after the drone attack against two key oil facilities in Saudi Arabia. The attack, claimed by the Shiite Houthi rebels in Yemen, led to a halving of Saudi oil production, slashing global production by about 5%.
In reaction, the price of light crude US WTI soared Monday night’s 14.7% to $ 62.90 a barrel (October futures contract) on the Nymex, while the Brent jumped 14.07% to $ 68.70 a barrel (November contract) at the time of Nymex closing. The prices have thus instantly recovered their levels last May, four months ago, before their collapse linked to the fear of a weak global demand against a backdrop of a trade war.
According to sources close to Riyadh, the repairs could last several weeks, which could disrupt global oil deliveries and push fuel prices up at the pump. However, global oil stocks are sufficiently supplied to avoid a shortage, according to experts. In the United States in particular, President Donald Trump immediately authorized the United States to tap into their strategic oil reserves.
Observers fear, however, an escalation of political tensions or even military conflict in the region, which could seriously undermine global supply. However, if oil prices continue to rise, this would contribute to worsening the global economic slowdown.
The United States and Saudi Arabia accuse Iran of having ordered the coordinated UAV attack, claimed by Iranian Shiite Huthi from Yemen. The spokesman of the US-Saudi coalition in the war in Yemen, said Monday night that the drones used were made in Iran. Saudi Colonel Turki al-Maliki said “The investigation is continuing and all indications show that the weapons used are Iranian”.