The ruble did not notice the conflict between Iran and Israel

Despite analysts’ concerns, the oil market on Monday, the first trading day after Iran’s attack on Israel on the night of April 14, did not rush to stratospheric heights, as if expecting further actions by the parties. A barrel of Brent was trading around $90. The ruble exchange rate also behaved calmly. On the Moscow Exchange, the dollar hovered around the 93.5 ruble mark, where it had been since the end of last week. Bitcoin alone has lost almost 10% in price over the past three days. MK found out from experts how to explain this market reaction.

Against the backdrop of the escalating armed confrontation between Iran and Israel, the market reaction turned out to be more than restrained even in the countries of this region. Investors continue to monitor developments, awaiting further actions by the parties. Their reaction is easy to explain. According to Freedom Finance Global leading analyst Natalya Milchakova, what happened over the weekend in the Middle East is not a “black swan” for markets, since it does not fit into the definition of an “unexpected blow” that no one could predict. Iran has warned about its intentions more than once, and Western media even named a specific date and almost the exact time of such an attack. Therefore, nothing unexpected happened for the markets last weekend. The US reaction was also quite predictable, so no collapse of stock markets or currencies of Middle Eastern countries occurred, especially since the rates of national currencies in Saudi Arabia, the UAE and Iran are fixed by the central banks of these countries. And the Israeli shekel even increased against the US dollar by 1.4%.

The ruble exchange rate, it seems, did not react to this situation either, since it was predictable, and on April 15, the ruble continued to gradually depreciate against the US dollar and yuan, but at the same time grow against the euro. Most likely, the further situation in the Middle East will take on the character of a purely local conflict, so Milchakova does not expect any sharp movements in the ruble in any direction in connection with these events. The ruble will now react to the dynamics of inflation in Russia, the balance of payments and the maintenance or cancellation of the mandatory sale of foreign currency earnings by exporters, as well as the volume of currency purchases by the Ministry of Finance. The expert expects that this week the dollar will fluctuate within the range of 92-95 rubles, the euro in the range of 98-101 rubles.

At the same time, another part of analysts calls not to concentrate on the events of the last three days, but to look at the situation starting from April 1, when Israel carried out an airstrike on the Iranian embassy in Syria. And in the most “defensive” and in the most “risky” assets, movements during this time were quite noticeable. And oil was not far behind. As Arthur Meinhard, head of the analytical department for global markets at IR Fontvielle, recalled, the specific shelling of Israel by Iran can be perceived as the climax to which two weeks have been moving. That is, in order to assess the local impact of the aggravation of the confrontation between Iran and Israel, it is worth analyzing the period from April 1 to April 12 and should look not at the stock markets, but at oil, gold and bitcoin. Thus, the benchmark Brent grade grew by 5.9% from the beginning of April to its peak on April 12 at $92.14 per barrel. This increase demonstrates traders’ concerns about a possible reduction in the number of supplies from Iran, which has not yet been observed. If fears are realized, then oil will rise even more, since the Middle East region accounts for a third of global crude oil production – too significant a volume for the market to remain indifferent.

A possible rise in oil prices is favorable for the Russian budget, as is the case for the ruble. This increases the revenue of exporters, and the raw materials component of Russian exports occupies a significant part and affects the structure of the trade balance of the Russian Federation. If revenues from the sale of energy resources are higher than forecast, as was the case, for example, in March 2024, then they are used to purchase gold and yuan for the country’s reserves. Last month, high oil prices brought an additional 107 billion rubles to the budget. “As for gold, the price of the precious metal changed even more significantly during this period, adding 8.9% from the opening of trading on April 1 to the peaks on April 12,” the analyst said. “And this is despite macro statistics from the US and expectations of a longer period of high interest rates in the States, which are a headwind for the precious metal.” By comparison, for the entire first quarter of 2024, gold rose less – just 8.3% – than over the past two weeks. This reflects the demand for it as a safe-haven asset when risks increase.

The reaction of Bitcoin, which, on the contrary, is a very risky investment, is also curious. If you look at the dynamics of Bitcoin from April 1 to the local bottom on April 13, you will notice a drop in its price by 14.7%. At the same time, it lost almost 10% of its value last Saturday on news from the Middle East. “Thus, the conflict between Iran and Israel affects certain assets, increasing the demand for defensive ones (like gold) and reducing the demand for risky ones (cryptocurrency),” Meinhard explained.

At the same time, it is too early for stock market players to relax, since the situation in the region can quickly escalate from the stage of exchanging blows to a full-scale conflict, although it is not beneficial even for the parties involved. “Iran can control the Strait of Hormuz, and this is 18% of the world oil market,” says Associate Professor of the Department of Political Analysis and Social-Psychological Processes of the Russian Economic University. Plekhanov Pavel Sevostyanov. “However, the United States can block 1.5 million barrels per day of Iranian oil. Thus, a shock may occur on world markets and then the price will rise, but the United States does not need this, since rising oil prices mean inflation before the elections. Therefore, a few weeks before the announced attack, the United States began to increase its strategic reserve to almost 400 million barrels, which could be used to reduce potential tension in the oil market. In general, a kind of consensus has emerged in the Middle East: Iran responded, there were no casualties, prices remained the same.”

However, something has changed. Iran is now in a much stronger position to manage tensions in the region. Israel has shown that it is not able to represent an independent force for resolving conflicts in the Middle East, so the factors for an oil shock remain, and they have become more likely, the expert is sure.