Global financial markets are experiencing significant volatility as tensions in the Middle East escalate. Reports of Iran preparing to launch a ballistic missile attack against Israel have sent shockwaves through international markets.
US Markets in Retreat
On Wall Street, stocks closed sharply lower on Tuesday. The Nasdaq Composite led the declines, falling 1.5% to close at 17,910, while the Dow Jones dipped 0.4% to 42,157 and the S&P 500 closed down 0.9% at 5,709. This downturn follows record highs achieved by some indices just a day earlier. The tech sector was particularly hard hit, with major tech stocks such as Apple, Nvidia, and Microsoft contributing significantly to the decline.
Impact on Oil and Safe-Haven Assets
The heightened tensions have led to a surge in oil prices, with Brent crude jumping to $73.5 from $70 earlier in the day. Additionally, safe-haven assets such as gold and U.S. Treasuries have seen increased demand, reflecting investors' cautious stance in the face of geopolitical uncertainty.
Canadian Markets Show Mixed Performance
In contrast to the declines in U.S. markets, Canada's primary stock index, the S&P/TSX composite, reached a record closing high on Tuesday. The index rose 0.1% to 24,033.99, driven by strong performance in the energy and materials sectors. The energy sector surged 3.4% as oil prices rose, and metal mining stocks also saw an uptick due to increased gold prices.
Despite the overall gain, other sectors in the TSX faced losses, with technology dropping by 1.6% and industrials finishing 0.8% lower. The Toronto market's performance was also influenced by its robust third-quarter gains, which were the largest in four years, driven by soaring gold prices and interest rate cuts by major central banks.
Investor Sentiment and Market Outlook
Investors are cautious, with many reallocating resources to safe havens in anticipation of potential prolonged conflict in the Middle East. The volatility index (VIX) has jumped to its highest level in nearly a month, reflecting increased market anxiety. However, some strategists believe that while the current situation could lead to short-term corrections, it is unlikely to derail the broader bull market.
