The iShares MSCI Spain ETF (NYSE:EWP) fell sharply on Tuesday, dropping 5.6% at mid-day after President Donald Trump declared that he would cut off all trade with Spain. The market move coincided with an escalating diplomatic dispute between Washington and Madrid over access to Spanish military installations.
Spanish authorities told U.S. officials they would not allow their bases to be used for operations connected to the attack on Iran. In response to Madrid's objection, at least 11 U.S. KC-135T and KC-135R tanker aircraft departed the southern Spanish bases of Rota and Morón late Sunday evening, according to the Spanish government statements.
José Manuel Albares, Spain's foreign minister, addressed the issue in a television interview Sunday, saying, "Spanish military bases will not be used for anything that falls outside the agreement with the United States and the United Nations Charter." He described the U.S.-Israeli operations as "unilateral."
On Monday, the Spanish government reiterated that it had denied U.S. forces the use of its military bases for activities related to the Iran attack. Officials noted that key refueling aircraft had left Spain for other countries on Sunday after Spain objected to their involvement.
Summary
Mid-day trading on Tuesday saw EWP decline 5.6% following President Trump’s announcement of a trade cutoff with Spain. The action followed Spain's refusal to permit U.S. forces to use its bases for operations linked to the Iran attack and the subsequent departure of a group of U.S. tanker aircraft from Rota and Morón.
Key points
- The iShares MSCI Spain ETF (EWP) fell 5.6% at mid-day Tuesday.
- President Donald Trump announced plans to cut off all trade with Spain.
- Spain denied U.S. forces use of its bases for operations tied to the Iran attack; at least 11 KC-135 tankers left Rota and Morón late Sunday evening.
Risks and uncertainties
- Continuation of diplomatic tensions could sustain pressure on Spain-related assets - sectors tied to Spanish market exposure are at risk.
- Restrictions on use of Spanish military bases create logistical changes for U.S. operations relying on refueling assets - aviation and defense support operations are affected.
- Market volatility following high-level political announcements may lead to further sharp moves in Spain-focused investment vehicles.