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  • Pump jacks operate at sunset in Midland, Texas, U.S., Feb. 11, 2019.

    Pump jacks operate at sunset in Midland, Texas, U.S., Feb. 11, 2019. | Photo: Reuters

Published 3 January 2020

War threats feed the rising price of the natural resource that is often behind the U.S. foreign policy: Oil

Oil prices jumped nearly US$2 a barrel and gold, the yen and safe-haven bonds surged on Friday after the U.S. President Donald Trump ordered the murder of Iraqi militia commander Abu Mahdi al-Muhandis and Iranian General Qassem Soleimani on Thursday.

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In London, which is one of the global markets where international energy prices are set, Brent crude for delivery in March climbed to US$69.50 a barrel, which is the highest price reached since Sep. 17, 2019.

This price increase is related to the exacerbation of the "geopolitical risk", which the U.S. attack has triggered at the energy market due to uncertainties about the possible response of Iran, a country that controls 10 percent of the world's total oil reserves.

"Iranians will calculate any response and are unlikely to be reckless in retaliation... Oil prices should calm down in the next few days," the Energy Aspects company expert Christopher Haines said, although he acknowledged that prices will still hold a "risk premium."

Trump's war adventures generated fear in international investors who have modified their expectations regarding capital markets.

On Friday, German Bunds and U.S. Treasury bonds, which are the world's benchmark government securities, had a bad time, even though they are typically seen as the safest assets.

The returns of these papers, which move inversely to their prices, shifted downward. The U.S. 10-year bond yields fell 5 basis points and German Bund yields dropped away from seven-month highs.

When the feeling of financial uncertainty increases, risk-averse investors seek to protect themselves by buying gold, an asset whose price rises when the perception of danger is greater.

On Friday, the spot gold price hit its highest since Sep. 5 at US$1,543 per Troy ounce and its price is expected to increase over 2 percent for next week.

"Gold prices are expected to remain firm on the possible escalation in geopolitical tensions," India Nivesh Commodities director Manoj Kumar said, as reported by MoneyControl.

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