Crisis In The Middle East Rocks The Markets

The crisis in the Middle East dominated the futures market
action today.  Crude oil closed at record highs, the Dollar fell against
most currencies, gold rose as commodities demand continues to increase, and the
Treasury yield fell to a one month low.  The events of the coming days and
weeks will surely have resounding effects upon the futures, bonds, currencies
and equity markets.

U.S. Treasury prices rose today, as 10-year note yield fell to
close at a one-month low.  With escalating tensions in the Middle East,
investors sought fixed-rate investments, driving the long-term benchmark higher. 
Inflation-indexed Treasuries also gained, as the U.S. government sold $9 billion
dollars in TIPS, in the first of seven auctions planned over the next five
weeks.  The U.S. government plans to add an estimated $100 Billion of new
Treasuries and TIPS in the coming weeks.

The Dollar fell against the Swiss Franc, British Pound and
Japanese Yen today after continuing tensions in the Middle East led investors to
seek a safe-haven currency.  The U.S.’s prominent role in the opposition of
Iran’s nuclear enrichment led to a drop across the board in the Dollar. 
The Swiss Franc often is seen as a safety zone for currency investors, as the
country is known to remain neutral during wars and violence.  The Yen’s
advance was seen as a pullback, after yesterday’s decline marked the biggest
loss in over a year.

Crude oil futures reached a new all time high today at $76.85,
to close at a record $76.70 a barrel.  Natural gas rose the most in a month
as demand increased for the cheaper energy, considering the escalating fighting
in the Middle East.  With no end in sight to the Iran situation, North
Korean missile tests and the Israel fighting, many industrial plants plan to
utilize their capabilities of switching from crude to natural gas in production.

Gold traded higher today to close up $9.60 at $658.60 an
ounce.  Demand for safe haven futures has steadily increased as the
geopolitical scene gears up for showdowns on many different fronts. 
Silver, however, traded down 1%, and aluminum also fell, down 2%.

Softs traded mixed today.  Coffee was up 0.8%, cotton
fell 1.4% and orange juice fell 2.7%.

Grains traded mostly down.  Corn was down 2.6%, wheat
fell 3.5%, oats rose 1.3%  and soy meal fell 1.4%.

Meats traded higher across the board, with potbellied pigs
leading the way again, up 2.6%.


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John Patrick Lee