Bonds are also bid as we look towards the European morning session although gains have ebbed a little in recent hours. That said, markets are generally maintaining a more risk-off mood with the yen and gold keeping solid gains to start the day.
USD/JPY moved towards the 108.00 handle while gold is up by 0.7% and is resting at near four-month highs. The worry for markets now is that we'll see Iran retaliate in due course and tensions between the two countries will continue to flare up.
Equities are also weaker across the board with US futures down by ~0.7% at the moment. That should spill over to European stocks once we get things going later in the day.
Oil is also a big beneficiary from all of this as Middle East tensions tend to add a bid to the commodity and this is no different. Both Brent and WTI are up by 3% and if geopolitical tensions stay the course, oil could be in for a solid start to the new year.
Looking ahead, watch out for the responses from the Iranian camp and also how the US looks to angle their latest move. If tensions continue to escalate, this will keep markets on the defensive in the near-term at the very least.
This may not necessarily be one that markets move on too quickly from.
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