Oil prices set to rise on Middle East crisis

Market commentary

Oil prices are projected to rise this week following Iran's attack on Israel over the weekend, but future gains may be dependent on how Israel and the West respond. Business Day reported that “Iran fired explosive drones and missiles at Israel late Saturday in response to a suspected Israeli attack on its consulate in Syria on 1 April, the first direct attack on Israeli soil that has raised worries of a larger regional battle. Concern of a response from Iran to the strike on its embassy compound in Damascus supported oil prices last week and helped send global benchmark Brent crude on Friday to $92.18 a barrel, the highest since October.” To coordinate a diplomatic reaction to the Iranian strike, US President Joe Biden announced that he would call a conference of the leaders of the major economies that make up the Group of Seven (G7) on Sunday. Business Day added that lower Iranian exports would result in further increases in oil prices, while an additional factor to be considered is the impact on shipping through the Strait of Hormuz, which transports roughly one-fifth of the world's total oil consumption every day.

Gold set a new record on Friday, rising above $2 410 an ounce while logging a 3.40% increase for the week as strong safe-haven demand outweighed worries about a potential Federal Reserve (Fed) delay in interest rate cuts. Following multiple reports that suggested Iran was gearing up for an impending attack on Israel, bullion sales increased. Gold also benefited from strong demand in China due to the ongoing volatility of the Chinese currency, as well as the need for further stimulus to boost the economy.

Disappointing economic data from China weighed on European stocks on Friday, while geopolitical uncertainties and expectations of a hawkish Fed further dampened investors' risk appetite. The pan European STOXX 600 closed flat at 505, registering a 0.80% weekly decline, while the STOXX 50 fell 0.40% to settle at 4 948, also recording a 1.30% weekly decline.

Friday saw an unprecedented drop on Wall Street as the S&P 500 had its worst day since January, falling 1.40%, while the Dow Jones lost 475 points, and the Nasdaq lost 1.60%. Growing tensions in the Middle East and major banks' earnings announcements greatly impacted market sentiment. After JPMorgan Chase, Wells Fargo, and Citigroup revealed that rising interest rates had adversely affected their net interest revenue, banking shares sold off.

Chinese stocks fell in tandem with the rest of Asia-Pacific, as interest rate concerns affected market sentiment. Meanwhile, data revealed that Chinese exports decreased more than expected in March 2024, while imports surprisingly fell. Along with a softer-than-expected inflation reading which bolstered bets on further policy easing reported on Thursday, available data pointed to a downturn in the world's second-largest economy. For the day, the Shanghai Composite fell 0.49% to close at 3 019 points. As technology stocks recovered from Wednesday's inflation-driven selloff, the Nikkei gained 0.21% to close at 39 523 points and the larger Topix Index climbed 0.46% to 2 760 on Friday, erasing losses from the previous session and taking cues from a solid lead on Wall Street overnight.

Friday saw a decline in the rand, but metals lifted the local bourse as investors took inflation and geopolitical risks into account. At 19h00, the rand had weakened 0.90% to R18.88/$, having touched an intraday worst of R18.97/$. The ALSI was little changed at 75 311 points, while the top 40 added 0.19%.