Missile Attacks Shake Markets with Falls and Rises
Commodities Soar, Bitcoin and Stocks Suffer.
Geopolitical tensions have significantly impacted global markets today. While stock indices have dropped and Bitcoin has corrected by nearly 5%, the prices of commodities, particularly gold and oil, have surged. Yesterday’s market movements were shaped by reactions to Federal Reserve speeches and Japanese elections, but today’s shifts are driven by something far more tangible: missile strikes.
On Tuesday, Iran launched hundreds of missiles at Israel in retaliation for recent Israeli actions, which resulted in the deaths of Hezbollah and Hamas leaders and marked the beginning of Israel’s occupation of southern Lebanon to dismantle Hezbollah’s infrastructure. U.S. Secretary of Defense Lloyd Austin echoed Israel's stance on the “need to dismantle Hezbollah’s attack infrastructure,” while Russia criticized Israel’s invasion of Lebanon.
This escalation in the Middle East has fueled a sharp rise in the prices of gold and oil, while Bitcoin and stock markets have seen significant corrections.
In moments like these, it’s important to keep three key points in mind:
Bitcoin may initially react negatively to geopolitical conflict, but history shows it has performed well over the long term in such scenarios. BlackRock’s “Bitcoin: A Unique Diversifier” report highlights this.
Gold and Bitcoin can complement each other in a portfolio. Their distinct characteristics offer unique advantages, and their differing responses to conflict can provide a balanced approach.
Wars are financed through fiat currency systems. The same mechanisms that erode people’s purchasing power are also used to fund conflicts.
U.S. Indicators
Data released today indicates that U.S. job openings rose in August after two consecutive monthly declines. The JOLTS report, released Tuesday, also showed a drop in layoffs. However, despite these positive signs, hiring remained weak, consistent with a slowing labor market.
Amid the turbulence of the Eastern conflict, today’s economic data didn’t seem to have a significant impact on prices. However, Friday’s upcoming payroll report, one of the most anticipated data releases, could change that. The payroll will provide critical insights, and we’ll learn whether the Federal Reserve was bluffing when it said it was in no rush to cut interest rates or if there are real signs of improvement in the world’s largest economy.