This morning’s Asian market session was more volatile than the usual. Crude oil prices rallied to their 8-month highs while gold prices surged close to twelve dollars within a few hours. This was brought about by news that General Qasem Soleimani was killed by US forces in Iraq.
Who was General Qasem Soleimani?
He was a key military figure in the Middle East. Since 1998, he headed the Iranian Revolutionary Guards’ powerful Quds Force. He was also said to have led campaigns against the Islamic State in the region. His reputation also includes him being credited as the mastermind behind President Bashar al-Assad’s Syrian war.
According to reports, General Soleimani had just arrived from Lebanon or Syria when a US air strike killed him and some members of his Iran-bakced militias convoy.
Rising Tensions between the US and Iran
According to the Pentagon, US military forces followed instructions from the President to attack the Baghdad airport and target General Soleimani. “This strike was aimed at deterring future Iranian attack plans. The United States will continue to take all necessary action to protect our people and our interests wherever they are around the world,” its statement read.
Tensions between the two countries had been escalating since December 2019 when protesters were said to have attacked the US embassy in Baghdad. According to some sources, General Soleimani gave the green light for the assault to the embassy. US President Donald Trump has previously warned that Iran “will pay a very big price” for any injury or death to US personnel. In response, Iran’s Supreme Leader Ayatollah Ali Khamenei shrugged off Trump’s threat by saying that the US will not be able to do anything.
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What Does This Mean for Crude Oil Prices, Gold, and Currencies?
It would seem that geopolitical tensions between the two countries are only going to escalate. Supreme Leader Ali Khamenei has already warned that “severe revenge awaits the criminals” behind the death of Soleimani and other military officials. Meanwhile, US President Trump tweeted a picture of the American flag after the news made headlines.
This means that risk aversion will likely linger in the markets. Investors will be at the edge of their seats, at least in the next few trading days. Until tensions ease, we can expect safe haven assets like gold, the Japanese yen, US dollar, and the Swiss franc to get stronger. Crude oil prices may also trade higher as geopolitical tensions could cause a disruption in oil production.
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