BREAKING: US500 pulls back on geopolitics

Stock markets have largely overlook weekend Middle East escalation, with European indices trading higher and US benchmarks opening higher as well. However, a noticeable pullback can be spotted on indices and other risk assets now. This pullback occurred after opening of the Wall Street session and coincided with a number of media reports suggesting that   in the Middle East may escalate further:

• Israel said that it reserves right to self-defense after recent Iranian drone and missile attack
• Iraq warned about escalation in the region and being dragged into a wider war
• Iran said it is not in favor of increase tensions, but will respond instantly and stronger than before if Israel retaliates for recent attacks

Damage from the Iranian attack on Israel was very small, and Israel's allies discourage it from retaliating to avoid triggering an all-out war between Israel and Iran, and say they will not support Israel in retaliatory strikes. Nevertheless, Axios quoted Israeli defense minister as saying that Israel has no choice but to respond to Iranian attack so risks remain elevated.

S&P 500 futures (US500) and German DAX futures (DE40) dropped around 0.8% off the daily highs. Gold is trading around 0.9% above daily lows reached shortly after opening of Wall Street session.

Source: xStation5