Via Financial Times

Oil prices and haven assets rallied after the US killed a top Iranian military commander in a move that has sharply escalated tensions between the two countries.

International benchmark Brent crude jumped 3 per cent to $68.26 a barrel, putting the marker on track for its biggest one-day gain in a month. US marker West Texas Intermediate rose 2.8 per cent to $62.88.

Assets that are seen as shelters during times of strife also advanced on Friday.

Gold climbed 0.9 per cent to $1,542 an ounce — a near four-month high. US Treasury yields, which move inversely to the price of American sovereign debt, fell 0.05 percentage points to 1.835 per cent — the lowest level in three weeks. German Bunds and UK gilts also rallied.

The White House said the US had taken “decisive defensive action” to protect its personnel abroad by killing General Qassem Soleimani, the head of the Iranian Revolutionary Guards’ overseas forces. Washington blames Tehran for an attack on the US embassy in Iraq earlier this week.

Line chart of Brent crude ($/barrel) showing Escalating Middle East tensions drive oil higher

The move has ratcheted up tensions between Washington and Tehran and could lead to further escalations in a region that is already fraught with turmoil, analysts said. Ayatollah Ali Khamenei, Iran’s supreme leader, vowed on Friday to take “tough revenge” for the death of Soleimani, saying “the resistance movement will continue with double motivations”.

Olivier Jakob, managing director of oil consultants Petromatrix, said “the killing of Soleimani calls for a serious increase of the geopolitical risk premium.”

“This was supposed to be a holiday week for many traders. Many will be cutting the holidays short and called-in for an emergency risk meeting,” he said.

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Concerns over the dramatic flare up also cascaded into other markets on Friday. The Japanese yen, which generally rises as domestic investors pull funds from abroad, strengthened by 0.5 per cent against the dollar.

S&P 500 futures dropped 0.8 per cent, suggesting Wall Street’s benchmark stock index could pull back after reaching a record peak on Thursday. Futures trade suggested European stock bourses would also open lower after a muted performance among Asian markets earlier in the day.