Middle East conflict leads to significant decrease in stock market indexes
In an unexpected turn of events, the Stock Exchange of Thailand (SET) took a nosedive on Monday morning, dipping over one percent. The cause? Fears of a broader global conflict following the weekend's military strike by the US on Iran's nuclear facilities.
The sell-off led the SET board to call an emergency meeting and implement temporary market-stabilization measures. The benchmark index plummeted 13.84 points, a 1.3% drop, hitting its lowest level since the covid-19-driven crash in March 2020.
During a media briefing on Monday, the SET announced some changes in their rules. From June 23-27, ceiling and floor limits for stocks, securities, and futures products will reduce from 30% to 15%. Moreover, the dynamic price band tightens from 10% to 5%. These measures aim to control excessive price swings and boost investor confidence.
However, these adjustments exempt securities tied to foreign underlying assets, such as depositary receipts, derivative warrants, and exchange-traded funds. These will keep following standard trading rules.
SET president Asadej Kongsiri stated that if market conditions stabilize, the emergency measures would be lifted ahead of schedule. He also pointed out that regional markets didn't decline as much as expected on Monday, suggesting that investors might have already factored in the geopolitical risk.
Daol Securities issued a warning about the potential escalation of tensions in the Middle East, triggered by the direct involvement of the US in the Israel-Iran conflict. If Iran retaliates by targeting Israeli interests or US military bases, it could surge global energy prices. In a worst-case scenario, if Iran blocks the Strait of Hormuz, a vital oil shipping route, crude oil prices could soar above $100 per barrel in the short to medium term.
Despitet he turbulence, Daol cautions that various sectors, including power utilities, petrochemicals, oil retail, tourism, airlines, exports, and general retail, could face headwinds due to rising input costs and geopolitical uncertainty.
As global investors prepare for potential further escalation in the Middle East, the Thai equity market is expected to remain volatile in the coming sessions.
Insight: The geopolitical tension between the US and Iran has led to a sharp decline in the SET and other regional markets. The heightened geopolitical risk has affected the energy markets, causing commodity market volatility and possibly capital outflows from Thai assets [1][2][3]. The further escalation in the Middle East continues to pose risks to Thailand's stock market and regional economies, making careful portfolio diversification and risk management essential for investors facing this volatile period.
- The geopolitical tension between the US and Iran is causing concern in the finance industry, with the Stock Exchange of Thailand (SET) dropping significantly due to fears of a broader global conflict.
- In response to the market volatility, the SET has implemented emergency measures to control excessive price swings and boost investor confidence, including reducing ceiling and floor limits for stocks, securities, and futures products.
- Meanwhile, Daol Securities has issued a warning about the potential escalation of tensions in the Middle East, noting that if Iran retaliates by targeting Israeli interests or US military bases, it could surge global energy prices, impacting sectors such as power utilities, petrochemicals, oil retail, tourism, airlines, exports, and general retail, and making careful portfolio diversification necessary for investors during this volatile period.
