Risk-off session on Friday: one and done or the start of the short-term trend?

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The main story on Friday was the U.S. airstrike in Iraq, in which Iranian Commander-General Maj. Gen. Qasem Soleimani was killed. The move was led by US President Donald Trump, the Pentagon said on Thursday.

Traders saw the reaction of the markets to the event. Now the focus is shifting to the strong possibility of retaliation from Iran. US action is a potential turning point in the Middle East and is likely to result in severe retaliatory measures against Iran and the forces it supports in the Middle East against Israeli and American interests.

Here's what Iranian officials are saying

Iranian Foreign Minister Mohammad Javad Zarif warned that the targeted assassination of Soleimani was "extremely dangerous and a stupid escalation".

"The US is responsible for all the consequences of its rogue adventurism," said Zarif on Twitter.

"A devastating vengeance will be taken for Soleimani's unjust murder … We will avenge everyone involved in his murder," the state-run news agency IRNA quoted Iran's Defense Minister Amir Hatami.

Analysts warn of counter-reactions from Tehran

"The Iranian leaders are proud and very risk-taking," said the Eurasia Group. “We expect moderate to weak clashes to last at least a month and will likely only take place in Iraq. Iranian-backed militias will attack US bases and some US soldiers will be killed. The United States will retaliate for strikes in Iraq, ”said Henry Rome and Cliff Kupchan, analysts for the political advice.

They predicted that Tehran's answer would "stop short of what we would call war" and added that "the likelihood of war is 40%".

How long do investors react to the event?

CNBC analysts relied on historical analysis to conclude that the price of oil will tend to rise after the events in the Middle East, while equities will eventually gain as assets in safe havens, gold and treasuries, decrease from their initial pops.

CNBC used hedge fund analysis tool Kensho to conclude that stocks and oil continued to grow over a three-month period as the safe haven assets gave up their earnings. Treasurys and the dollar report negative returns on average during this period, while the gold price remains unchanged.

If financial markets follow historical precedents, many of the moves we saw on Friday will reverse in the coming months.

China is pushing for calm and restraint, but the trade deal is not yet over

Beijing has too much to lose in economic terms to more than justify harsh criticism of US measures against Iran, economists and analysts. Therefore, the US's assassination of Tehran's leading military commander on Iraqi soil should not interfere with the Washington-Beijing trade talks.

"Iraq's sovereignty and territorial integrity should be respected and peace and stability maintained in the Gulf region of the Middle East," China's Foreign Ministry spokesman Geng Shuang said on Friday. "We call on everyone involved, especially the United States, to remain calm and reserved and to avoid further escalation of tensions."

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