MARKET WRAP: JSE closes lower due to Middle East tension

03 January 2020 - 18:30 By Lindiwe Tsobo

The JSE ended the day lower on Friday as geopolitical tension between the US and Iran caused uncertainty in financial markets globally, following the US airstrike in Iraq that killed Iran’s top commander, General Qassem Soleimani.

The rand weakened as rising tension in the Middle East placed pressure on riskier assets, prompting investors to seek safer waters.  

Shortly after 5pm, the rand had weakened 1.09% to R14.2344/$, 0.95% to R15.8857/€ and 0.75% to R18.6187/£. The euro was little changed at $1.1165.

Earlier, the Shanghai Composite was flat while Hong Kong’s Hang Seng was down 0.32% and Japan’s Nikkei 225 was closed. 

The Dow was 0.61% down at 28,693.52 points at 5pm. In Europe, France’s CAC 40 was down 0.20% and the German DAX 30 1.29%.

Oil prices rose more than $2 a barrel, and gold and other safe-haven assets jumped on the day, also a consequence of the US strike.

The death of Soleimani, head of the elite Quds Force, prompted Iranian Supreme Leader Ayatollah Ali Khamenei to vow “severe revenge”. This could further rattle global markets. 

China, a close trading partner with Iran, voiced strong opposition to the US use of force and urged restraint. The growing risk of war between the US and Iran has raised concern that the focus on the US-China phase-one trade deal could shift. Analysts believe that China will likely remain loyal to Iran and continue to attempt to ease the situation.  

“Financial markets are now awaiting Iran’s response, which will likely have a wide-reaching impact on all asset classes. Iran may choose to target Americans abroad, cyber-attacks, along with further uprisings in the regions that will see US troops on heightened alert in Iraq, Yemen, Syria, and the Israeli-Lebanese border”, said Oanda senior market analyst Edward Moya. 

The JSE all share was down 0.24% to 57,858.39 points, while the top 40 was up 0.19%. The platinum index was up 2.59% and resources 1.05%. Banks fell 0.88% and gold miners 4.78%.

Gold was up 1.42% to $1,550.75/oz and platinum 0.94% to $988.48. Brent crude was up 3.74% to $66.75 a barrel.

- BusinessLIVE