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Stocks slip, safe havens gain as Middle East conflict rages
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Stocks slip, safe havens gain as Middle East conflict rages
Jun 18, 2025 11:05 PM

TOKYO (Reuters) -Global stocks edged lower on Thursday while investors took cover in safe havens such as gold and the U.S. dollar gained as financial markets were on edge over the possible entry of the United States into the week-old Israel-Iran air war.

President Donald Trump kept the world guessing about whether the United States will join Israel's bombardment of Iranian nuclear sites, telling reporters outside the White House on Thursday, "I may do it. I may not do it."

The Wall Street Journal said Trump had told senior aides he approved attack plans on Iran but was holding off on giving the final order to see if Tehran would abandon its nuclear programme.

Europe's main equities index pointed to a lower open, while Germany's DAX futures were down 0.3% in Asia afternoon hours.

U.S. S&P 500 futures slipped 0.1%, although most U.S. markets - including Wall Street and the Treasury market - are closed on Thursday for a national holiday.

"Market participants remain edgy and uncertain," said Kyle Rodda, senior financial markets analyst at Capital.com.

"Speculation remains rife - fed probably strategically by the Trump administration - that the U.S. will intervene, something that would mark a material escalation and could invite direct retaliation against the U.S. by Iran," he said. "Such a scenario would raise the risk of a greater regional conflict, with implications for global energy supply and probably economic growth."

Much of the recent nervousness in markets has been centred around crude supply shocks from the Middle East which were reflected in elevated crude prices. Brent crude edged down to $76.6 per barrel on the day, but remained not far from the 4-1/2-month peak of $78.50 reached on Friday.

The gloomy mood hampered Asian stocks, with Taiwan's stock benchmark down 1.5%, and Hong Kong's Hang Seng sliding 2%.

Prices of traditional safe-haven assets such as gold edged higher by 0.1% to $3,372.36 per ounce, while the U.S. dollar firmed against the euro, the Australian and New Zealand dollars.

CENTRAL BANK POLICY

Overnight, the Federal Reserve delivered some mixed signals to markets. Much to Trump's displeasure, policymakers held rates steady as expected and retained projections for two quarter-point rate cuts this year.

However, Fed Chair Jerome Powell struck a cautious note about further easing ahead, saying at his press conference later that he expects "meaningful" inflation ahead as a result of Trump's aggressive trade tariffs.

Strategists at MUFG said the Fed "is underestimating the weakness in the economy that was present before the tariff shock, specifically, almost ignoring the cracks that have been visible in the labor market for years."

"We maintain our view that the longer they wait to ease, the more they may need to do."

Markets will now look to a string of central bank policy decisions out of Europe for any possible catalysts.

In Britain, despite Wednesday's report showing inflation cooled as expected last month, the Bank of England is widely expected to keep interest rates steady as policymakers consider the potential energy price shock from the Israel-Iran conflict.

Sterling was flat at $1.34 ahead of the decision.

Central banks in Switzerland and Norway are both also anticipated to deliver policy decisions later in the day.

In Japan, longer-dated Japanese government bond yields rose, while medium-term yields declined after Reuters reported that the government intends to cut sales of super-long bonds by about 10% from the original plan.

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