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Markets Calm Amid Middle East Tensions; Gold and Oil Prices Shift

Global markets have started to stabilize as traders wait to see what happens next in the Middle East after Iran's attack on Israel over the weekend. Both European and US stock futures rose slightly.

Oil prices dropped amid hopes that the conflict might not escalate further, especially after Iran’s comments that they considered the conflict "concluded," and following President Biden’s indication to Israeli Prime Minister Netanyahu that the US would not back an Israeli counterattack. Meanwhile, Treasury yields, which had dropped in the last session, inched lower again.

Hebe Chen from IG Markets noted, "The market’s calm reaction probably comes from the complex mood among traders right now. Everyone’s hoping that this incident won’t repeat itself, but they’re also anxiously waiting for what might come next." Asian stocks fell, following a decline in US stocks due to increased geopolitical tensions, poor bank earnings, and concerns that the Federal Reserve might keep interest rates high for a longer time. However, Chinese stocks did better after the government promised more regulatory support.

In other news, Chinese developer Vanke mentioned it is working on overcoming its cash issues as China’s leadership is becoming increasingly worried about the ongoing real estate troubles and their impact on the economy.

Regarding currencies, Malaysia’s central bank is taking steps to strengthen the ringgit, which is near its lowest value since 1998. In Japan, the Finance Minister said they are keeping a close eye on the yen as it hits new lows against the dollar.

Metals like aluminum and nickel saw prices jump after the US and UK announced new sanctions blocking Russian supply of these metals. Gold prices also rose.

With the ongoing high inflation and the possibility that interest rates might stay high, the worsening situation in the Middle East could lead to more market instability. Experts believe oil prices might go above $100 a barrel and predict more people will invest in Treasuries, gold, and the dollar, which could mean further losses for the stock markets.

Bitcoin’s value went up after a sharp drop following the attacks. Stock markets in Saudi Arabia and Qatar saw small losses in light trading, while Israel’s stock market was unstable but ended with a slight gain. As the earnings season in Wall Street begins, major banks like JPMorgan Chase and Wells Fargo reported earnings that showed the challenges of rising costs. Citigroup, however, beat profit expectations thanks to higher demand for financing and credit card use, suggesting that high interest rates could be beneficial for big banks.

JPMorgan’s CEO, Jamie Dimon, mentioned, "Many economic signs look good right now, but we’re watching several uncertain factors closely, including ongoing wars, rising geopolitical tensions, persistent inflation, and the impacts of tightening monetary policy."

Traders are now looking ahead to upcoming economic data and meetings, including the IMF and World Bank meetings in Washington. This week, they'll be watching for new data on Chinese economic growth and inflation updates from Japan, the Eurozone, and the UK.

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