Stocks fall on Middle East tensions, losses fueled by crisis of confidence | Financial markets

Stock markets in Australia, Japan, Hong Kong, Singapore and South Korea fell after Iran's attack on Israel.

Stocks in Asia fell after Iran escalated Middle East tensions by launching a barrage of missiles and drones at Israel over the weekend, raising fears of a wider conflict in the volatile region.

However, while Israel called the attack – which Tehran said was in response to an earlier strike on its Syrian embassy – analysts said there was hope among traders that the escalation of hostilities could contain the crisis.

That sliver of optimism helped lower oil prices.

Saturday's bombardment of more than 300 ballistic and cruise missiles and attack drones — mostly repelled by air defenses — and forecast-beating inflation and jobs data heightened concerns about the outlook for U.S. interest rates.

Iran told the United Nations the strike was a „legitimate” self-defense response to an April 1 attack in Damascus that killed seven members of Tehran's Revolutionary Guard, including two generals.

It said on social media that „the matter can be considered closed”, but warned that „if the Israeli regime makes another mistake, Iran's response will be very severe”.

Israeli military spokesman Daniel Hagari called it a „severe and dangerous escalation”.

But experts said the limited scope of the attack meant Iran was trying to show strength with its attack, rather than lead to conflict.

Meanwhile, US President Joe Biden reportedly warned Israeli Prime Minister Benjamin Netanyahu to „get over it” and abandon the counterattack.

However, Saxo's Redmond Wong said: „All eyes are on any response from Israel and markets will be volatile in the day ahead for any geopolitical headlines.”

READ  Business confidence improved in major Arab economies in May on strong growth momentum

Asian markets were mostly down on Monday, although they pared their early big losses.

Tokyo, Singapore, Mumbai, Taipei and Manila fell by at least 1 percent, while Hong Kong, Seoul, Sydney and Wellington posted losses.

Shanghai rose more than 1 percent after China unveiled new market regulatory measures on Friday, which an analyst said should help its long-term performance.

U.S. futures rose after falling sharply on Friday as investors headed into the weekend jittery.

„The muted market response stems from a more complicated sentiment in the market at this stage,” said Hebe Chen of IG Group.

„Market participants certainly haven't given up hope that last weekend's events were a one-off, while holding their breath for what might happen next.”

Oil prices have eased now that worries about escalation have eased, although observers have warned they could rise above $100 if the crisis worsens.

„This war could escalate if the Israeli government follows the White House's advice and abandons retaliation,” said Helima Croft at RBC Capital Markets.

Broadly risk-on sentiment lifted the U.S. dollar against its major peers, while hopes for U.S. interest rate cuts faded, helping the yen hit a fresh 34-year high against the yen as Japanese officials drew attention after saying they were ready. Take action to support their currency.

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