Oil prices spiked over 4 percent on Friday morning before paring some of its gains following the news that Islamic Revolutionary Guards Corps (IRGC) commander Qassem Soleimani had been killed in an air strike.
Brent crude is currently trading up 3.29 percent at $68.43, with West Texas Intermediate also up just over 3 percent at $63.04.
Stock markets also dropped, with most Asian shares reversing gains. Futures on the S&P 500 Index have declined by 1.02, and the Stoxx Europe 600 Index has dropped 1.04 percent, as investors jump to safe haven assets such as gold and US treasuries.
“What we see right now is a very typical geopolitical reaction from investors. We saw the oil price skyrocket in the morning, and we saw the US future indices drop significantly … this is a very typical risk off reaction to what we what happened yesterday and the day before,” said Majd Dola, equity portfolio manager at FAB.
The drop in markets ended what was overall a great year for markets in 2019 as the S&P 500 hit a record high on Thursday. Equities had begun 2020 positively on expectations of a resolution of the long-standing trade war between the US and China.
“We're going to see some more, maybe headline risk, coming out of the Iranian administration and you some possible aggressive tweets from Trump, which will create a panic in the market … we might see another spike in oil. On Monday we might see some sell off in the stock market,” added Dola.
Friday’s spike in Brent crude oil lifted prices to their highest since drone attacks on two Saudi Aramco facilities in September last year which knocked 5 percent of global oil supply offline.