Introduction: High Energy Prices and Market Nervousness
Global energy prices have remained high, contributing to a sense of unease in stock markets worldwide.
Investors are closely monitoring the unfolding global political situation, which has added to market volatility.
Gold and Oil Price Speculation
There is growing speculation in the market that the price of gold could surpass $2000, and oil prices could reach $100 per barrel.
These expectations have made investors increasingly cautious about market dynamics.
Bond Market Sell-Off and Inflation Concerns
Even before the recent Hamas attack on Israel, there was a notable sell-off in global bond markets. Traders are concerned that interest rates will need to rise to combat potential inflation resulting from elevated energy costs.
Rising Bond Yields in Germany and the UK
German’s 10-year bond yield has risen by 4.5 basis points to 2.78%, reflecting the increased yields in global bond markets.
The 10-year UK equivalent has also seen a rise, with an increase of six basis points to 4.443%.
Oil Prices and Implications for Petrol Costs
Brent Crude, while stable for the moment, is trading above $90 a barrel, with concerns that it could reach $100 per barrel.
Such a price surge would have direct implications for petrol costs, and this rise follows the recent Hamas attack.
Concerns About Natural Gas Prices
Natural gas prices are of particular concern due to their impact on home heating and food costs. Currently, natural gas prices have seen a decrease, with a 3p drop to 133.9p per therm.
Market Reaction to Potential Gas Supply Disruption
The market is attentive to developments surrounding the rerouting of gas from the Leviathan gasfields in the north of Israel.
Any disruption to this gas supply could lead to a spike in EU natural gas prices. While the risk of a supply event is considered low, the market will respond to escalating developments.
Global Market Reactions and Safe Havens
Asian shares, including Japan’s Nikkei and China’s CSI 300, fell in response to fears of a ground offensive in Gaza.
This has led to the strengthening of safe haven assets like the US dollar and gold.
Upcoming Key Events and Economic Outlook
The speech by US Fed chair Jerome Powell on Thursday and earnings results from major Wall Street banks, including Goldman Sachs and Morgan Stanley, will be closely watched. The latest forecasts from the EY Item Club suggest that the UK will likely avoid a recession in 2023, assuming the Bank of England refrains from further interest rate hikes.
London Stock Exchange Performance
The FTSE 100 index in London experienced a minor drop of 3 points, reaching 7596. However, companies like Shell and BP continued to see gains.
Ongoing Gold and Oil Price Speculation
Investor sentiment continues to be affected by geopolitical tensions in the Middle East. Gold prices, in particular, surged due to expectations of a potential Israeli offensive in Gaza.
While purchases slowed, market participants anticipate that a lasting solution to ease tensions remains elusive, and a potential Israeli offensive could push gold prices to $2000 or higher.