European stocks drop and oil soars after U.S. airstrike kills top Iranian general

By The editor On Jan 3, 2020

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European stocks tumbled and oil prices soared on Friday after a top Iranian commander was killed in a U.S. airstrike at Baghdad’s airport.

The Stoxx 600

SXXP, -0.74%

fell 0.7% and the DAX

DAX, -1.70%

dropped 1.5%, reversing yesterday’s new year rally, while Brent crude futures for March delivery

BRNH20, +3.88%

soared 4.1% to $68.63 and West Texas Intermediate crude for February

CLG20, +3.71%

jumped 4%.

The FTSE 100

UKX, -0.31%,

home to oil majors BP

BP, +1.73%

and Shell

RDSA, +1.40%,

suffered smaller losses, falling 0.4%.

What’s moving the markets?

General Qasem Soleimani, Iran’s most powerful military commander, was killed by a U.S. airstrike in Iraq on Thursday night, sending global markets into a spin. The Pentagon said Soleimani was “actively developing plans to attack American diplomats and service members in Iraq and throughout the region”.The attack reignited geopolitical tensions with Iran’s Supreme Leader Ayatollah Ali Khamenei promising “severe revenge.”

U.S. stock futures dropped and European stocks followed in early trading on Friday, while

BRN00, +3.88%

jumped more than 4%.

As investors sought safe havens amid mounting risk, the price of gold

GC00, +1.34%

climbed 1.4% to $1549.

AJ Bell investment director Russ Mould said: “It is unsurprising to see crude oil prices trade higher to factor in potential disruption to supply from the region.

“Turbulence often sees investors reaching for the safety belt of gold exposure and this explains the advance for the precious metal this morning.”

He added: “What happens next for equities will depend on what form Iran’s promised ‘severe revenge’ takes and how nations which are more friendly to it, like China and Russia, respond.”

Which stocks are active?

Airline stocks were among the worst affected as oil prices rose sharply. Air France

AF, -6.56%

plunged 7.5%, Deutsche Lufthansa

LHA, -7.24%

dropped 7.4% and easyJet

EZJ, -3.32%

fell 3.6%.

Conversely, oil majors posted solid gains with BP

BP, +1.73%

rising 1.8% and Royal Dutch Shell

RDSA, +1.40%

gaining 1.4%.

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