Israel strikes Iran, shaking the markets

Israel struck Iranian targets in today’s Asian session as suspected in yesterday’s report causing wide uncertainty in the markets as the possibility of a regional war has appeared on the horizon. The Israeli army stated 200 jets struck more than 100 sites across Iran in a large-scale attack. The Israeli strikes, targeted Iranian nuclear facilities, missile factories, but also high-profile individuals such as the Revolutionary Guards commander and nuclear scientists. It should be noted that the US had distanced itself in the past few days from any military action, and thus it may be that Israel acted on its own accord and without prior approval from the US. Specifically the US State Secretary Marco Rubio stated that the US is not involved and that the Israeli air strikes were a unilateral action. Furthermore, the US State Secretary also stated that “our top priority is protecting American forces in the region”, highlighting the possibility of US bases being targeted by Iran. Also, media report that the airstrikes are the first of other actions to follow on behalf of Israel, which implies a continuance of the uncertainty. Other possible targets of the Israeli Airforce may include Iranian oil facilities, as Israel may try to neutralise Iran’s main sources of income. Such a development obviously could boost oil prices further, yet the repercussions could be wider as it could also weigh on economic activity on a wider level, considering that China is one of the main importers of Iranian oil. Iranian counterstrikes are expected and it’s characteristic that the Israeli official state plane, Wing of Zion, similar to US Airforce One, took off from the airport of Tel Aviv, with no further details being announced. Given the high uncertainty and high stakes involved in the issue, markets have turned substantially nervous, which could lead to unexpected moves in the markets or overreactions to the developments as they unfold. For the time being we note that safe haven instruments such JPY and CHF remain flat against the USD, gold’s price received some safe-haven inflows as did US bonds, while oil prices have skyrocketed given the market concerns for the supply chains of the international oil market.

XAU/USD continued to find support for a third day in a row and yesterday clearly broke the 3365 (S1) resistance line, now turned to support. Given that the precious metal’s price continues to form higher peaks and higher troughs, we maintain yesterday’s bullish outlook and intend to keep it as long as the upward trendline guiding it remains intact. The RSI has risen further aiming for the reading of 70 thus supporting our bullish outlook. A small word of caution though would be that the gold’s price has hit on the upper Bollinger band, which may force gold’s price to correct lower. Should the bulls maintain control as expected, we may see the gold’s price breaking the 3500 (R1) resistance line, an all-time high level start aiming for the 3650 (R2) level. A bearish outlook currently seems remote and for its adoption we would require gold’s price to break the prementioned upward trendline, in a first signal that the upward motion has been interrupted and continue to break the 3365 (S1) line and start actively aiming if not reaching the 3200 (S2) support barrier.

WTI’s price skyrocketed in today’s Asian session, breaking the 68.40 (S1) resistance line, now turned to support and reaching at some point as high as $74.70 per barrel before correcting lower. We maintain our bullish outlook for the commodity’s price yet also suspect that a correction lower could be in the cards, as the price action has breached the upper Bollinger band and the RSI indicator rose above the reading of 70, implying a possibly overbought market. For the continuance of the bullish outlook we would require WTI’s price to breach the 72.20 (R1) resistance line, paving the way for the 75.65 (R2) resistance level. A bearish outlook currently seems remote and for its adoption we would require WTI’s price to break the 68.40 (S1) support line clearly and continue to break also the 64.00 (S2) support level, with the next possible target for the bears being the 5985 (S3) support barrier.