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US - Iran Conflict Intensifies

U.S. drone strike at Baghdad International Airport on early Friday (3/1) has killed Iranian Major General, Qassem Soleimani, who led Quds Force of the Islamic Revolutionary Guards Corps. This action comes as a response to a New Year Eve’s Attack by Iran militias on the U.S embassy in Baghdad. Following the news, U.S. stocks plunged, indicated with more than 1.6% drop of S&P 500 futures alongside with Nasdaq 100 futures. This tension also impacted global stock markets, including The Stoxx Europe 600 which fell by 0.4% and Hong Kong’s Hang Seng index which dropped by 0.3% While stocks retreat from a strong start in early 2020, stocks from companies in the defense industry have climbed. The SPDR S&P Aerospace & Defense ETF spiked by almost 4% and iShares U.S. Aerospace & Defense ETF rose by 2.5%. Big-name defense stock also climbed with Northrop Grumman rose by 8% while Lockheed Martin and Raytheon have risen by around 4% and 2% respectively in the last five days. Defense stocks in Asia has also climbed on Wednesday (8/1) with South Korean weapons manufacturer Victek rose as high as 26% and Hanil Forging Industrial jumped for more than 21%. Alongside with defense stocks, shares of energy and oil companies have risen as well, with up to 4% surge in oil prices and currently at the level of above $70 per barrel. Other than oil, the price for safe-haven assets, such as gold and bitcoins, also rose for 2.3% and 9% respectively. Head of Market Strategies of AxiTrader Ltd, Stephen Innes said that surge in gold price was triggered by the statement of Iranian Government that they would no longer subject to the restriction of their uranium amount after the killing of General Qassem Soleimani. In a politically complicated situation, the market must watch for further escalation of conflict in the Middle East, and hope for a peaceful negotiation to happen between the two countries, as further acts of war may prove to bring disastrous consequences to not only US and Iran, but the whole world. Source : Forbes CNBC New York Times Kompas

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