In recent days, one of the largest geopolitical conflicts in the Middle East has erupted with Pakistan's Hamas launching an attack on Israel. Assets affected by geopolitical risks, such as crude oil and gold, have seen significant increases. As the conflict unfolds, will safe-haven assets, cryptocurrencies, defense, and energy stocks continue to rise? And what other investment opportunities should not be overlooked?
Market Review
Commodities: Crude oil has been affected by the Israel-Palestine conflict. On October 9th, Brent crude oil opened higher in the US, rising more than 5% at one point before stabilizing. The rebound in the European and American refined oil markets on Tuesday relieved downward pressure on oil prices. While Israel and Palestine are not major oil-producing countries, ongoing tensions have raised concerns among market investors that this conflict could eventually engulf the entire Middle East.
Gold, influenced by safe-haven sentiment, opened with a substantial gap up of nearly $15 on October 9th (Monday) and briefly rose $30 from October 6th. Since then, gold has been trading within a narrow range of $1956-$1964. Silver also opened higher on Monday but later fluctuated between $21.5 and $21.9.
Safe-Haven Currencies: Due to the Israel-Palestine conflict, safe-haven currencies like the Japanese Yen and US Dollar rose on October 9th, while riskier currencies like the Australian Dollar fell, causing the US Dollar Index to briefly increase by 0.5%. However, the US Dollar Index retreated during intraday trading as Federal Reserve officials adopted a dovish stance, ending the day with a slight decline.
Stocks: Under the influence of safe-haven sentiment, defense and energy-related stocks have risen significantly. Northrop Grumman (NOC) stock price surged by 11.4%, Lockheed Martin (LMT) rose by 8.9%, Occidental Petroleum Corporation (OXY) increased by 4.5%, and ExxonMobil (XOM) went up by 3.5%.
Bitcoin: On October 7th, the Israel-Palestine conflict broke out, but Bitcoin (BTC) was not significantly affected. It traded near $28,000 that day before entering a four-day decline. As of writing, BTC has fallen to around $27,000, representing a decrease of approximately 4%.
With the development of the current conflict, what will be the future direction for these assets? The Mitrade team, in collaboration with various analysts and experts, provides the following investment outlook.
Future Outlook
Gold
Mitrade Perspective: Influenced by the outbreak of the Israel-Palestine conflict and the counterattack from buyers, gold may experience a minor rebound in the short term. Resistance levels are at 1875 and 1905, while support levels are at 1818 and 1806. However, due to positive economic data recently announced by the US, gold may face long-term pressure.
Crude Oil
Mitrade Perspective: Crude oil opened higher due to the Israel-Palestine geopolitical conflict. However, as the market expects the conflict to remain contained within a limited scope, downward risks exist for crude oil. Currently, crude oil is consolidating at high levels, with support at 84.3 and resistance at 84.9.
Japanese Yen (USD/JPY)
Mitrade Perspective: In the short term, driven by safe-haven sentiment, the Japanese Yen has gained some upward momentum, but in the medium term, USD/JPY is likely to maintain a range-bound trend between 147 and 151.
US Dollar (DXY)
Mitrade Perspective: As safe-haven sentiment recedes, the US Dollar Index is more influenced by monetary policies. The pullback in US bond yields puts pressure on the US Dollar Index, increasing downward risks. If it falls below 105.5, the next support level is at 104.5. However, if it remains above the trendline, it will still be in an upward trend with resistance at 107.4.
Lockheed Martin (LMT)
Mitrade Perspective: If the Israel-Palestine conflict escalates again, defense stocks may continue to rise, with a target price of 450 for Lockheed Martin (LMT). However, if the situation stabilizes, there is an increased risk of a pullback, with support at 410.
Occidental Petroleum Corporation (OXY)
Mitrade Perspective: If the Israel-Palestine conflict escalates again, energy stocks may continue to rise, with a target price of $65 for Occidental Petroleum Corporation (OXY). However, if the situation is brought under control, there is an increased risk of a pullback, with support at $61.
Bitcoin
Mitrade Perspective: The price fluctuations of Bitcoin (BTC) are less influenced by the Israel-Palestine conflict and more driven by global economic conditions and the cryptocurrency market cycle. This year, BTC has mainly fluctuated within the range of $25,000 to $31,000. However, if the conflict escalates, BTC could gain upward momentum from safe-haven demand. Therefore, it is important to closely monitor whether the geopolitical conflict expands and whether economic sanctions are imposed.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
