Tensions Rise Again
While the majority of the world’s attention has rightfully been on the ongoing COVID-19 crisis, which continued to have a devastating human and economic cost, there are some other factors beginning to rear their head which warrant trader attention.
Over the week, we have seen an uptick in confrontational rhetoric between the US and Iran. It is worth remembering that before the COVID-19 crisis erupted, tensions were running extremely high between the US and Iran following the US assassination of top Iranian General Qassem Soleimani, a celebrated Iranian military figure.
In the aftermath of the US attack there was a great deal of fear that a retaliation from Iran, which was threatening to take swift revenge against the US, would spill over into a full scale conflict. However, despite Iran retaliating by way of a rocket attack on two US sites in Iraq, the US took the unexpected step of stepping away from the conflict and refraining from any further retaliation, avoiding the military conflict many feared was waiting to happen.
Trump Threatens Action on Twitter
However, fast forward to this week and the two nations appear ready to engage each other once again. Following US accusations that Iranian gunboats were “harassing” US navy ships in the Gulf last week, Trump threatened fresh action via Twitter, saying: “I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”
Following Trump’s threat, the Iranian Iranian Islamic Revolution Guard Corps (IRGC) commander-in-chief Gen Hossein Salami responded on Thursday, instructing Iranian naval forces “to destroy any American terrorist force in the Persian Gulf that threatens the security of Iran’s military or civilian shipping”.
Iran Launches Military Satellite
In another worrying development this week, the IRGC successfully launched what it claimed is a military satellite into orbit via a ballistic missile. The launch has immediately drawn criticism from many of America’s allies who deem the action to be a violation of a UN security council resolution.
There is a fear now that with tensions running high amidst the ongoing COVID-19 crisis and with the risk that each side is underestimating the others capabilities due to the current need to manage the crisis, that a conflict could emerge. Markets have been lower this week in light of this emerging threat to risk appetite and this will certainly be a theme to watch over coming weeks.
S&P500 (Bullish above 2692.25)
From a technical viewpoint. The S&P has broken below the bullish channel which has framed the recent recovery though is still sitting atop the yearly S1 for now. While price remains above the 2692.25 level, continued upside is likely with the yearly pivot 2976.50 the main upside objective.
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