The situation in the Middle East has become tense, causing a decrease in risk-taking behavior in the market. However, the most significant price reactions have started to settle down as the morning progresses. Reports from the media suggest that Israel conducted an attack on Iran on Friday morning. The extent and impacts of these attacks are still uncertain, with Iranian authorities claiming that the effects were minor.
In response to the news, investors sought safe-haven investments, causing initial price fluctuations that have now stabilized. Notable changes include a decrease in stock prices and an increase in government bond prices, resulting in lower interest rates. For example, Germany’s ten-year government bond rate fell by two percentage points to 2.47 percent, while the long-term interest rate in the United States briefly dropped by over ten basis points.
After half an hour of trading, the Stoxx 600 index decreased by 0.7 percent, with industrial stocks experiencing the most significant decline of over 1.5 percent. The market’s preference for safe-haven assets was evident in the rise of grocery company shares by 0.8 percent. L’Oreal’s better-than-expected results also supported grocery companies, with the company’s share price increasing by 4.8 percent.
Kathleen Brooks, director of research at XTB, noted, “Now that the attack appears limited, the market has found relief. However, if uncertainty persists, risk premiums across asset classes may rise.” European markets are heading into a third consecutive week of decline amidst ongoing geopolitical tensions in the Middle East.