Markets shrug off fresh Iran tensions over plane crash

Tom Belger
·Finance and policy reporter
Updated
A member of a rescue team walks among debris from a plane belonging to Ukraine International Airlines, that crashed after a take-off from Iran's Imam Khomeini airport, on the outskirts of Tehran, Iran January 8, 2020. Nazanin Tabatabaee/WANA (West Asia News Agency) via REUTERS ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY
A member of a rescue team walks among debris from a plane belonging to Ukraine International Airlines. Photo: Nazanin Tabatabaee/WANA (West Asia News Agency) via REUTERS

Markets largely shrugged off fresh tensions in the crisis over Iran on Friday morning despite suspicions growing Iranian missiles may have brought down a Ukrainian plane.

The European Stoxx 600 index and three major US stock market indices all reached record highs on Thursday, and were trading close to flat or higher in early trading on Friday.

Nasdaq futures (NQ=F) were trading 0.2% higher at around 8.50am in London, while S&P (ES=F) and Dow Jones (YM=F) were trading 0.1% higher.

In Europe, the German DAX (^GDAXI) and the FTSE (FTSE) treaded water, while the Stoxx 600 (^STOXX) was down less than 0.1%. The French CAC 40 (^FCHI) slid 0.2%.

Meanwhile oil and gold prices, which rose immediately after the US killing of an Iranian general last week, were both down on Friday. Brent crude (BZ=F) and gold futures (GC=F) were trading 0.2% lower.

Tensions between the US and Iran were widely seen to have eased on Thursday.

READ MORE: What the Iran crisis could mean for UK petrol prices

US president Donald Trump said Iran appeared to be “standing down” after its government said its missile strikes on military bases for US-led forces in Iraq, where no casualties have so far been reported, concluded its retaliation.

But the potential for renewed hostilities then appeared to grow as a US official warned on Thursday a plane departing from Iran to Ukraine had been brought down by anti-aircraft missiles. Iran’s flight authorities have denied the claims.

UK prime minister Boris Johnson also said there was a “body of information” that an Iranian surface-to-air missile had caused the devastating crash, which left 176 people dead.

But Johnson and Canadian prime minister Justin Trudeau, responding to the death of 63 Canadians onboard, have both said the strike “may well have been unintentional.”

Uncertainty over whether the strike was deliberate, as well as the US house of representatives’ vote for a veto over further military action called by the president, may have kept a lid on fears of fresh escalation.

Michael Hewson, chief market analyst at CMC Markets, said: “In the space of a few days we appear to have swung full circle; with investors seemingly convinced that the problems in the Middle East appear to have settled down, at least for the time being.

“While that seems a big assumption to make it would need a significant escalation now for the current rebound to come full circle.”

Masanari Takada, cross asset strategist at Nomura Securities, also told Reuters: "On top of easing tensions in Iran, optimism on U.S. corporate earnings are fuelling sentiment. The euphoria is coming back to the markets.”