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Investors rush to safety on US-Iran tensions

By AFP - Jun 25,2019 - Last updated at Jun 25,2019

Pedestrians wait to cross a street in Tokyo's city centre on Tuesday (AFP photo)

LONDON — Rising tensions between the United States and Iran dampened the mood in equity markets on Tuesday as investors turned to safe havens the yen and gold, with the latter striking a near six-year high.

Oil prices steadied despite the US imposing further sanctions on key crude producer Iran, with investors biding their time ahead of next week's key OPEC meeting on output.

Traders looked ahead also to crucial trade talks due this week between US President Donald Trump and Chinese counterpart Xi Jinping.

"Geopolitical tensions weighed on the [stock] markets on Tuesday after the US imposed new sanctions on Iran," said Russ Mould, investment director at AJ Bell. "Investors [are] switching their attention once again to gold as a safe-haven asset."

The precious metal struck $1,439.65 an ounce Tuesday, its highest level since September 2013, with a softer dollar lending additional support, according to traders.

Japan's currency, viewed also as a haven investment, jumped to a near six-month high at 107.41 yen to the dollar.

Meanwhile, the return on 10-year German government bonds, another safe haven investment, hit a record low of -0.33 per cent, which means investors are paying Berlin to hold their money.

Bitcoin held above $11,000 after breaking the marker on Monday for the first time in 16 months.

The latest round of US sanctions against Iran's supreme leader Ayatollah Ali Khamenei and military top brass, meanwhile, meant the "permanent closure of the path to diplomacy" with Washington, the Islamic republic's foreign ministry said.

Trump unveiled the new restrictions on Monday, days after Iran shot down a US drone that Tehran said had entered its airspace.

Foreign ministry spokesman Abbas Mousavi's Tweet provided a catalyst to sell Asian shares on Tuesday.

However, European stock markets were steady in afternoon deals, with Wall Street also little changed at the opening.

Traders were keeping tabs on developments in the China-US trade standoff as both countries' leaders prepare for crunch talks on the sidelines of this week's G-20 summit in Japan.

World stock markets last week rallied after Trump flagged positive phone talks with Xi.

The call took place "at the request of the US side" and they agreed to maintain contact, the Xinhua news agency said.

"The prolonged trade war between the two largest economies has downgraded global growth as more barriers to trade means higher prices," said OANDA senior market analyst Alfonso Esparza.

"Optimism remains high, but more details need to emerge before the market can fully price in how far apart the two sides really are."

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