The development of the conflict between Iran and the United States remains the main focus of investors. The latest news is that President Donald Trump would impose more sanctions on Iran, rather than continue with a military operation in the region. This is seen as a softer approach than previously feared, and has thus helped the stock markets strengthen. At the moment, the United States seems confident that Iran will not attack again, after the last missile strike on US troops in Iraq.
The de-escalation of the US-Iran conflict has had a negative effect on safety assets. The Japanese yen slid to two-week minimums against the US dollar as investors lost interest in it. The response of the Swiss franc and precious metals such as gold has been similar.
The price of crude oil also suffered a blow. On the one hand, oil increased earlier this week because investors feared the military operations of the US and Iran in the Middle East could affect the regular oil-related activities in the region, but now this fear is subsiding. Furthermore, it was widely expected that US oil reserves will decrease for a third week in a row, but they actually increased, which means the oil market remains well-supplied, adding pressure to oil prices. Brent crude retreated to $65.75, while the WTI dropped to $59.84.
The United Kingdom is also climbing back in the news. Yesterday Boris Johnson met with EU Commission President Ursula von der Leyen to discuss Brexit. The UK will leave at the end of this month and remains adamant that it will not extend the transition period past 2020. However, von der Leyen warned that this will make the negotiations of a free trade agreement difficult. Recent fundamentals from the UK have also been disappointing, and just yesterday the Bank of England said it fears a recession. The British pound is weakening.
