The tensions in the Middle East seem to be easing, as gold and oil prices experienced a decline early Thursday.
President Biden’s Support for Israel
President Joe Biden recently returned from his trip to Israel, where he reaffirmed his support for the country following its attack by Hamas. Additionally, he negotiated a deal allowing humanitarian aid to be delivered to the Gaza strip through Egypt.
Evidence Regarding Gaza Hospital Blast
Biden and Israel jointly announced that they have evidence suggesting the blast at a Gaza hospital on Wednesday was not caused by an Israeli strike. However, this news triggered protests in Jordan, Turkey, and Iran against Israel.
Concerns of Conflict Spreading
The explosion at the hospital raised concerns that the conflict could escalate and potentially involve major oil-producing countries like Iran or Saudi Arabia. As a result, investors turned to gold as a safe-haven asset.
Gold Prices Remain High
Gold experienced a decline of 0.4% and is currently valued at $1961.30 per ounce. Despite the recent dip, gold has still seen a growth of over 4% in the past week and is 20% higher compared to the same time last year. The current prices are near their highest point since August. Remarkably, gold has outperformed the S&P 500 in terms of annual returns.
Value of Gold During Uncertain Times
Investors generally flock to gold during periods of uncertainty due to its long-standing reputation as a reliable store of value. In contrast, U.S. government bonds, another popular safe-haven asset, have seen some challenges lately due to concerns about inflation and the Federal Reserve’s decision to maintain higher interest rates.
Decline in Oil Prices
West Texas Intermediate (WTI), the U.S. standard oil variety, experienced a 1.4% decrease and is now valued at $87.09 per barrel. Similarly, Brent crude, the international benchmark, fell by 1.6% to $90.03 per barrel.
Delicate Situation and Risk of Escalation
Despite the signs of calming, the situation in the Middle East remains delicate, and there is still a risk of the conflict escalating. In response, Boeing has expedited the delivery of conversion kits that transform unguided bombs into precision-guided ones for Israel.
Implications for Defense Stocks
Analysts have speculated that the conflict could serve as a catalyst for defense stocks. As a result, Boeing’s stock saw a slight increase of 0.3% in premarket trading, and Lockheed Martin witnessed a rise of 1.1% on Wednesday.