Investors were arguably too complacent about U.S.-China trade tensions. Some analysts wonder if they’re making the same mistake when it comes to Iran.
Indeed, headlines surrounding U.S.-China relations — and trade, broadly — appear to be driving stocks up or down depending upon their tone, largely to the exclusion of other news. Meanwhile, growing turmoil in the Middle East, while garnering at least the passing attention of oil traders, seems to be going largely unnoticed by equity investors.
“The risks of a Middle East military confrontation are rising sharply amid twin attacks on energy assets in the Gulf and the U.S. decision to order an evacuation of nonessential personnel from the U.S. Embassy in Baghdad and consulate in Erbil,” said Helima Croft, global head of commodity strategy at RBC Capital Markets, in a Wednesday note.
She was referring to a Tuesday attack on Saudi pipelines and other energy infrastructure. Iranian-backed Houthi rebels in Yemen said they were responsible for the attack (see map below).
RBC Capital Markets
The embassy and consulate evacuations in Iraq came after State Department warnings of heightened threats in the Middle East from Iran-allied militias, which could target U.S. citizens and soldiers in Iraq.
Earlier in the week, a U.S. official said Iran was likely behind weekend attacks on four tankers near the Strait of Hormuz, the world’s most important oil-transit chokepoint. Tehran has denied it was behind the attacks and accused the Trump administration and its allies of attempting to provoke a confrontation.
The U.S. last week dispatched an aircraft carrier group, bombers and other resources to the region, citing increased Iranian threats.
Nicholas Colas, co-founder of DataTrek
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