15 September 2019
We will have to wait till financial markets start their Asia session on Monday, to see how Oil prices react to Saturday’s drone attacks on Saudi Aramco and its subsequent reduction in production by over 50% (5% of the daily global demand).
There are many aspects of this issue that will affect stock markets on different levels. Smaller markets will face a negative effect while the US will see a higher demand for its crude oil loads. Such a big attack will have geopolitical repercussions and that can hurt global stocks.
For US stock markets, next week’s Federal Reserve meeting (Sep 17) will be very important. For Asia, Oil prices will have a bigger impact since Asia is a major importer of Sudi oil. Indian stock markets will be caught between positive news of stimulus for the Housing sector and exports and negative impact of jump in Oil prices which will drive inflation and budget deficit higher. Shares of India’s biggest company, Reliance Industries, will be in focus since this company had done a major deal with Aramco just last month and had enjoyed an 11% jump on that news in a single session.
We will not speculate what will happen in world stock markets on Monday, but wait and see how resilient markets prove. Big investors will not let their money go down the drain so easily. One thing is sure, every segment of financial markets will witness huge volatility on Monday. Currency, commodities, stocks, bonds- all could see a churning. We’ll be there to report it all for you.