Global benchmarks are trading significantly lower as market sentiment has been shattered by the drone attack on two of the biggest Saudi Arabia’s oil fields (Abqaiq and Khurais), run by state-owned company Aramco. The attack had a strong impact across all markets has it removed 5.7M barrel and almost 5% of global oil supply, which caused the biggest intraday jump ever on Brent and WTI (20%). The Tadawul All Shares index in Riyadh dropped by 3.1% and safe haven assets like treasuries, gold, CHF and JPY currencies were being driven higher as the attack highlights the vulnerability of the top oil exporter and brings on rising concerns over potential further geopolitical risks in the region. The case has already gone global after U.S. officials put the blame on Iran.
Photo by Ashkan Forouzani.
Stocks in Asia closed mixed overnight after Chinese data (industrial production + retail sales) missed estimates, adding further pressure to global equities. This week is likely to be a real test to market sentiment after a strong start in September for equity traders as most investors now must take geopolitical risk back into account.
Investors will keep a close eye on tomorrow’s ZEW Economic sentiment in Germany as well as on the FED’s decision this week as Jerome Powell is widely expected to cut rate in reply to a global slowdown and a muted U.S. inflation. For now, the biggest move in Europe has been that of the SMI-20 index in Zurich, where the market broke-out an important technical support at 10,000.0 pts, invalidating the short-term bullish trend. Prices have found support over the 9,952.0pts price level, maintaining a consolidation phase on the market.
