Global Markets: Oil, gold prices retreat as worries abate over larger Mideast conflict

 Global Markets: Oil, gold prices retreat as worries abate over larger Mideast conflict

By Herbert Lash

NEW YORK (Reuters) - Gold and oil prices retreated on Wednesday after earlier surging, and shares on Wall Street advanced, amid investor optimism that Iran's attack on U.S. forces in Iraq was unlikely to escalate into a full-blown conflict in the region.

Iran said it had fired missiles at U.S. targets in Iraq in retaliation for last week's U.S. drone strike that killed Iranian commander Qassem Soleimani and raised fears of a new war in the Middle East.

Gold surged past $1,600 for the first time in nearly seven years in earlier trade, before paring gains as fears of a larger conflict in the Middle East abated amid milder rhetoric between Iran and the United States. The safe-haven yen fell from three-month highs against the dollar and the Swiss franc, another safe haven, also pared gains.

Brent oil futures fell off a four-month peak hit in frenzied early trading after the Iranian rocket attack appeared to have no impact on oil infrastructure or crude flows in Iraq.

MSCI's broad gauge of stocks across the globe <.MIWD00000PUS> shed 0.04%, but stocks on Wall Street gained, along with bourses in Paris, Frankfurt and Milan.

U.S. President Donald Trump said there were no American casualties in the Iranian strikes and that Tehran appeared to be standing down.

Iran's long-term goal of a sphere of influence might be jeopardized if it attacks too aggressively, said John Vail, chief global strategist at Nikko Asset Management in Tokyo.

"The impact on global risk assets will probably moderate from here as we are likely past the worst part of the crisis," Vail said in an e-mail. "Neither side wants a war."

Investors are betting on a de-escalation in Middle East tensions and the United States and Iran to revert to a tit-for-tat relationship, said Sebastien Galy, senior macro strategist at Nordea Asset Management in Luxembourg.

    "The Iranians failed to cause U.S. casualties," Galy said.

The pan-European STOXX 600 index <.STOXX> rose 0.07% and emerging market stocks lost 0.41%.

On Wall Street, the Dow Jones Industrial Average <.DJI> rose 80.27 points, or 0.28%, to 28,663.95. The S&P 500 <.SPX> gained 9.04 points, or 0.28%, to 3,246.22 and the Nasdaq Composite <.IXIC> added 22.84 points, or 0.25%, to 9,091.42.

Spot gold was slightly subdued at $1,573.50 per ounce, having soared to $1,610.90 earlier in the session, its highest since March 2013

Brent crude prices fell on reports the Iranian rocket attack appeared to have no impact on oil infrastructure or crude flows, and on a report showing a surprise build in U.S. stockpiles.

The U.S. Energy Information Administration (EIA) said crude inventories rose by 1.2 million barrels during the week ended Jan. 3. Analysts had expected a decline.

Brent futures fell $1.04 to $67.23 a barrel and U.S. West Texas Intermediate (WTI) crude declined $1.39 to $61.31 a barrel. WTI futures earlier hit $65.65, the highest since late April.

U.S. Treasury yields were little changed, retracing an overnight drop as investor concerns eased about a U.S.-Iran conflict.

Overnight, yields on the 10-year U.S. Treasury note dropped to 1.705%, its lowest in more than a month, as worried investors bought U.S. government debt in a safe-haven move after Iranian forces fired missiles at military bases housing American troops in Iraq.

Benchmark 10-year notes last rose 2/32 in price to yield 1.8178%.

The dollar index <.DXY>, tracking the unit against six major peers, rose 0.26%, with the euro down 0.36% to $1.1111.

The Japanese yen weakened 0.36% versus the greenback at 108.81 per dollar.

(Reporting by Herbert Lash; Editing by Bernadette Baum)

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Updated Date: Jan 09, 2020 00:11:15 IST