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Iran tensions

Asian stocks dive after Iran fires missiles at US-led forces

Yen, gold and oil surge as investors fear tensions following Soleimani killing

A man walks past an electric board showing Nikkei Stock Average in Tokyo on Jan. 8.   © Kyodo

TOKYO -- Major Asian stock indexes fell on Wednesday, after news reports of Iran's ballistic missile attacks against U.S.-led forces in Iraq in retaliation for the Jan. 3 killing of a top Iranian commander in an American drone strike.

Rising tensions between Tehran and Washington caused investors to dump equities and flee to safer assets. The Japanese yen surged to a three-month high in the early morning, strengthening to 107.76 per dollar.

Japan's Nikkei Stock Average fell over 600 points, or 2.6%, from yesterday's close at one point, touching a month-and-a-half low of 22,951. The index recovered slightly to close down 1.6%, at 23,204.

Stocks related to maritime transport, services and precision equipment manufacturing, among others, led the decline. Major companies such as SoftBank Group, Mitsubishi UFJ Financial Group and Toyota Motor slipped over 1%, while Kawasaki Kisen Kaisha, one of the largest shipping companies in Japan, plunged close to 6%.

Other indexes in Asia also closed down, with South Korea's Kospi, Hong Kong's Hang Seng and China's Shanghai Composite all declining around 1%, while the Taiwan Stock Exchange Weighted Index fell 0.5%.

Singapore's Straits Times Index sank earlier in the day but recouped most of its losses to close slightly lower, about 0.2%, from the previous day.

Gold and oil prices, meanwhile, rose sharply as investors scrambled to avoid fallout from the unstable financial markets, while assessing the instability in the Middle East.

Yoshinori Ogawa, senior strategist at Okasan Securities, believes that investors were caught by surprise. "Iran struck back faster than most people expected," he said.

Although noting that investors have become cautious, Ogawa said that he was "pretty sure there are some out there who plan on buying the dip." He pointed out that, especially in Japan, the index had climbed significantly in 2019, making stocks difficult to purchase.

He cautioned that any buying would be on condition that "tensions between Iran and the U.S. subside."

The Pentagon released a statement in response to the barrage of more than a dozen ballistic missiles, stating that the attacks targeted the Al Asad and Irbil military bases.

According to Reuters, Iranian-state TV quoted a Revolutionary Guard commander on Wednesday as saying, "The missile attacks today were just the first step. [U.S. President Donald Trump] should think about withdrawing troops from the region and not to leave them within our reach."

Meanwhile, analyst firm Citi Research said in a statement that the mounting tensions "may further unwind positions" in emerging market growth assets and foreign exchange.

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