This morning, the market opened the first session of the week in a deep red sell-off. Although oil prices continued to hold their upward momentum, Asian stock indices and gold were heavily pressured, with gold dropping more than $200 from $4536 to $4319 per ounce right at the start of the Asian session.
The cause of this sharp decline comes from escalating tensions in the Strait of Hormuz, as the United States has declared it will deploy ground troops to Iran’s Kharg Island to take control of the strait.
In response to this threat, Iran stated that it would attack U.S. and allied energy facilities in the region.
At present, this conflict is causing strong market volatility and significantly impacting global economies – particularly South Korea, which had to trigger a circuit breaker after the KOSPI 200 index fell more than 5% this morning.
Overall, the situation indicates that the Middle East conflict is reaching a peak, and in the short term it will continue to put strong pressure on the markets, especially gold.
Gold is likely to fall below the $4000 per ounce level if tensions do not ease, while oil prices may surge back toward the previous peak of $125 per barrel.
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