Commodity prices rally as Iran retaliates against the US with missile strikes in Iraq

Oil, gold and silver prices have been boosted by escalating tensions between the US and Iran as the latter today sought revenge for the assassination of its second-in-charge by launching missiles at US military bases in Iraq.

According to tweets by US President Donald Trump and the Pentagon, Iran launched “at least a dozen ballistic missiles” targeting two Iraqi bases hosting “US military and coalition personnel at al-Asad and Erbil”.

The attack follows Iranian Supreme Leader Ayatollah Ali Khamenei’s vow to seek “severe revenge” over the US’ killing of Major General Qassem Soleimani, Iran’s second-in-command, last Thursday.

Stock markets have slid in response to the latest actions, while prices for oil, precious metals, bonds and bitcoin have surged as investors seek a safe haven among the turmoil.

Meanwhile, #WorldWarThree is officially trending on social media.

Prices rally as investors seek safe haven assets

US stock market futures fell as much as 1% shortly following the news. In Australia, the S&P/ASX 200 slid almost 0.6% in early afternoon trade on Wednesday before recovering slightly to close 0.13% down at 6817.6 points.

In contrast, oil prices rose sharply after news of the missile attack and are currently up 2.3% at US$64.49, raising concerns there could be disruptions to oil supplies from the Middle East.

It also interesting to note that back in November, Iran declared it had discovered a new oilfield in the country’s south with more than 50 billion barrels of crude, which could lift Iran’s proven reserves by a third to about 150 billion barrels.

As investors sought a safe haven, gold jumped more than US$30 per ounce to over US$1,600/oz, its highest price in almost seven years.

By Wednesday evening, it was sitting at US$1,594/oz.

Silver also jumped to US$18.58/oz, up 0.22% from Tuesday and is 2.65% higher over the past week.

Bitcoin, now also being considered a safe haven asset, surged 5.08% to $8,163.7.

The start of war?

General Soleimani, along with other Irani officials, was killed in a US drone strike near Baghdad airport.

He had just arrived on a commercial flight to attend the funerals of Iraqi soldiers killed a few days earlier in US air strikes and had also teed up to meet Iraq’s Prime Minister Adil Abdul-Mahdi.

According to the Pentagon, President Trump authorised the assassination as a preventative measure to protect Americans in Iraq.

“General Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region … and his Quds Force were responsible for the deaths of hundreds of American and coalition service members and the wounding of thousands more,” the Pentagon statement read.

“We took action last night to stop a war. We did not take action to start a war,” President Trump tweeted at the time.

But contrary to the US’ accusations, Iraqi Prime Minister Abdul-Mahdi claimed he planned to meet Soleimani that morning to discuss a peace deal that Iraq was brokering between Iran and Saudi Arabia.

Prime Minister Abdul-Mahdi even said President Trump personally thanked him for the efforts just hours before General Soleimani’s death.

President Trump then threatened to respond dramatically if Iran retaliated, even warning the US would target sites that were important to Iran’s culture – a concerning threat since attacking cultural sites has been declared an international war crime since the signing of the 1954 Hague Treaty.

….targeted 52 Iranian sites (representing the 52 American hostages taken by Iran many years ago), some at a very high level & important to Iran & the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD. The USA wants no more threats!

— Donald J. Trump (@realDonaldTrump) January 4, 2020

Concurrently, Russian President Vladimir Putin reportedly met with Syrian President Bashar al-Assad in Damascus this week and while official statements made no mention of Soleimani’s assassination, the timing is striking.

While Syria has been supported by Russia in its civil war since 2015, General Soleimani also supported Assad with Iran-backed forces.

Shortly after the US’ attack, Iraq’s parliament passed a resolution to force US military presence out of the country. A letter from a US general then surfaced, which allegedly informed Iraq’s Defence Ministry that it would remove its American troops.

However, US Defence officials are now insisting the letter was a “mistake” and a “draft” that “should never have been released”.

President Trump has also threatened to charge Iraq sanctions that will “make Iranian sanctions look somewhat tame” if they order the US to leave, as well as make Iraq “pay back” the US for its air base worth billions of dollars.

Iran has claimed responsibility for the retaliation on US military bases in Iraq this morning, with its foreign minister Javid Zarif tweeting, “Iran took and concluded proportionate measures in self-defense under Article 51 of UN Charter targeting base from which cowardly armed attack against our citizens and senior officials were launched”.

At the present, there are no confirmed details on casualties or damages with President Trump tweeting that “All is well!” and he will be making a statement on Thursday.

All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.

— Donald J. Trump (@realDonaldTrump) January 8, 2020

According to Iran’s state-run news outlet ISNA, Iran sent a letter to the United Nations Security Council saying it’s not looking for a war.

Although, the Iranian government did announce it was no longer restricting its nuclear program and would immediately ramp-up its nuclear production facilities.

Most recently following the missile attacks, Iran’s Islamic Revolutionary Guard Corps (IRGC) have warned the US that if Iranian soil is bombed, Tehran would target the cities in Dubai, United Arab Emirates, Haifa and Israel.