Afternoon Markets Brief 1-3-202

Summary and Price Action Rundown

The S&P 500 is retreating from yesterday’s new record high, although declines remain orderly and moderate, as geopolitical concerns in the Middle East halt the ongoing rally in stocks, lift oil prices, and drive demand for safe haven assets. US equities are down but have rebounded from the lows of the morning as investors ponder the ramifications of the significant escalation of US-Iran tensions. For context, one of Iran’s top military leaders and a number of his deputies were killed by a US airstrike in Iraq last evening following a series of attacks on US personnel and facilities in the country by Iranian proxies. US officials indicate that General Soleimani was arriving in Baghdad to plan an escalation of the offensive. S&P 500 futures had been down over 1.6% overnight as fears of retaliation or even outright war weighed on sentiment. Nevertheless, risk appetite has steadied amid a lull in hostilities. Treasury yields are down as investors seek safe haven assets, while gold prices are up 1.3% and trading near multi-year highs. The dollar is slightly lower, however, while the yen is up 0.6%. Brent crude prices have jumped above $68 per barrel but remain well shy of April’s 2019 high of $75. Analysts are pondering the potential for Iran to attack Saudi oil infrastructure, as occurred in September, or even attempt to close the Straits of Hormuz, through which around 20% of global oil exports pass. For context, recent geopolitical incidents in the Middle East have resulted in only fleeting increases in oil prices.

It is worth noting that geopolitical risks are notoriously difficult for investors to price into risk assets, and global security issues have been generally discounted by market participants in recent years. Price action is likely to remain reactive to events in the near term.

Holiday Schedule – Markets Policy Partners will be publishing on a limited basis over the holiday period, with full service resuming on January 6th. In the meantime, please check out our upgraded website ( and latest podcasts ( Here’s wishing all our readers a bright and healthy 2020!