Middle East Tensions Fuel Gold Surge And Oil Rally

Rising hostilities in the Middle East have boosted gold close to its all-time high and driven oil prices higher, with investors flocking to safe-haven assets. Meanwhile, Hong Kong’s Hang Seng index surged over 4% following China's stimulus, though mainland markets remained closed for Golden Week. European markets are poised for gains, while traders await key US employment data that could impact the Federal Reserve's rate decision.

Equities

The FTSE 100 rose by 0.5% on Tuesday, with energy stocks leading the gains due to rising concerns over Middle East tensions. Oil and gas stocks performed well, with the sector index jumping 2.2%, marking its best day in two months. Precious metal miners also benefited, climbing 1.9% as gold prices increased. In contrast, the FTSE 250 index dropped by 0.7%.

Burberry shares fell 4.1% after brokerages lowered their price targets, contributing to a 3.6% decline in the personal goods sector. Mulberry shares slipped 3.2% following their rejection of a £111 million takeover offer from Frasers. Greggs shares dropped 5.8%, despite maintaining its full-year outlook, as sales growth slowed in the latest quarter.

In the US, all major indices closed lower on Tuesday, with the Nasdaq falling 1.5%, the S&P 500 down 0.9%, and the Dow Jones losing 0.4%. These declines came after Iran launched ballistic missiles at Israel, sparking caution among investors. Energy stocks saw notable gains, with Exxon Mobil climbing 2.3% as US oil prices increased by 2.4%.

Defence companies also performed strongly, with Northrop Grumman rising 3% and Lockheed Martin gaining 3.6%. The S&P 500's aerospace and defence index hit a record high. However, airline stocks struggled, with Delta Air Lines falling 1.6%.

Investors were cautious amid geopolitical concerns, but stock indices ended off their lows. Data released earlier in the day showed that US job openings rebounded in August, while manufacturing activity fell short of expectations. Additionally, the ongoing port strike on the East Coast and Gulf Coast has halted about half of the nation’s ocean shipping, adding to the uncertainty in the market.

Forex & Commodities

The US dollar strengthened following an Iranian missile attack on Israel, as investors sought safety in the greenback. The dollar index rose by 0.5%, marking its sharpest gain in a week, while the euro slipped 0.06% to $1.1060. Sterling also fell slightly by 0.11% to $1.3272. Meanwhile, the Swiss franc remained steady at 0.8460 per dollar.

Gold prices held firm at $2,659.79 per ounce after rising more than 1% the previous day, benefiting from safe-haven demand amidst heightened Middle East tensions. However, the stronger dollar kept further gains in check.

Oil prices jumped over $1 on concerns that Middle East tensions could disrupt supplies. Brent crude surged 1.47% to $74.64 per barrel, while US West Texas Intermediate (WTI) rose 1.6% to $70.95. The increase followed Iran's largest-ever military attack on Israel, with fears of further escalation contributing to supply concerns.