The financial markets appear to be cautiously recovering from the initial shock of the Iran war. While stock markets in the United States rose, the Bitcoin price perhaps benefited most from the improved market sentiment.
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Stock markets recover after oil price drop
On Wall Street, major indexes closed higher after oil prices fell sharply.
The Dow Jones index rose by about 301 points (+0.6%), while the S&P 500 gained about 0.4 percent. Technology stock exchange Nasdaq even climbed 0.7 percent.
The increase came after oil prices fell precipitously. The US West Texas Intermediate (WTI) oil price lost about 10 percent and fell to around $81 per barrel. International Brent oil prices also fell about 10 percent to about $84 per barrel.
Investors are thus responding to signals that Western countries may want to release strategic oil supplies to absorb disruptions caused by the war around Iran, and to signals about a quick end to the conflict.
Possible use of strategic oil reserves
The International Energy Agency (IEA) is meeting to discuss whether to bring emergency oil supplies to the market. The G7 countries have also held discussions about a possible release of strategic reserves.
The idea behind such a measure is simple: extra oil on the market can temporarily depress prices and thus limit economic damage.
However, the oil market remains extremely volatile. The price could still rise quickly if the disruptions in the energy market persist for longer.
According to energy experts, oil could even rise above $120 per barrel again if the conflict around Iran continues.
Oil remains the most important factor
For now, the oil price remains the most important variable for investors.
Analysts point out that long-term high energy prices could ultimately cause economic damage. In that scenario, consumers and companies will adjust their behavior by, for example, driving less, flying less or limiting energy consumption.
That process, known as demand destruction, has often created a ceiling for extremely high oil prices in the past.
For financial markets, this means that the coming weeks will probably remain highly dependent on one factor: the development of the oil price and the situation surrounding Iran.
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Source: https://newsbit.nl/bitcoin-blijkt-verrassende-winnaar-na-eerste-schok-van-iran-oorlog/
