Wall Street rebounds as Israel-Iran tensions ease
NEW YORK: US stocks ended higher on Monday, recovering from Friday's sharp losses as investors' concerns over ongoing hostilities between Israel and Iran eased somehow, Xinhua reported.
Escalation of conflicts between Iran and Israel had briefly rattled markets -- oil prices surged, the Cboe Volatility Index (VIX) spiked, and gold prices rose as investors sought safe havens. However, Monday's action suggested confidence remained intact. High-yield credit spreads widened by just 2 basis points.
The Dow Jones Industrial Average rose 317.30 points, or 0.75 per cent, to 42,515.09. The S&P 500 added 56.14 points, or 0.94 per cent, to 6,033.11. The Nasdaq Composite Index increased by 294.39 points, or 1.52 per cent, to 19,701.21.
Seven of the 11 primary S&P 500 sectors ended in green, with communication services and technology leading the gainers by adding 1.53 per cent and 1.52 per cent, respectively. Meanwhile, utilities and health led the laggards by losing 0.50 per cent and 0.40 per cent, respectively.
Market history supports the idea that geopolitical shocks are often short-lived in their market impact.
According to Deutsche Bank analysts Parag Thatte and Binky Chadha, the S&P 500 typically drops around 6 per cent in the three weeks following a geopolitical event, but usually recovers those losses in the next three weeks.
Deutsche Bank's Henry Allen added in a Monday note that geopolitical events tend to have lasting effects on equities only when they disrupt the real economy, either by slowing growth or driving inflation. So far, investors seem to be betting that neither scenario is likely in the near term.
Despite lingering geopolitical concerns, historically low equity positioning and resilient fundamentals may be keeping a broader sell-off at bay, allowing risk appetite to return for now. 'Focus will remain on geopolitical headlines, but as long as the conflict stays limited between Israel and Iran, it's unlikely to materially impact the markets,' said Tom Essaye at the Sevens Report.
Tesla rose more than 1 per cent on Monday, while Meta Platforms climbed 2.9 per cent, helping power the broader market. Palantir, often seen as a beneficiary of rising geopolitical instability due to its defence and AI ties, rose nearly 3 per cent.
The rising move comes ahead of a key week for monetary policy. Investors digested a weaker-than-expected manufacturing survey released Monday morning by the New York Federal Reserves (Fed), adding to signs of slowing momentum in the industrial sector. Still, the data did little to shift expectations ahead of the Federal Reserve's interest rate decision on Wednesday.
According to CME Group's FedWatch Tool, futures markets are pricing in a 100 per cent chance that the Fed will hold rates steady, despite renewed pressure from US President Donald Trump, who has called on Fed Chair Jerome Powell to cut interest rates.
However, elevated oil prices stemming from the conflict in the Middle East are expected to keep inflation risks on the Fed's radar and reduce the likelihood of rate cuts in the near term. 'Markets got a reminder that tariffs aren't the only potential source of market volatility,' said Chris Larkin at E*Trade from Morgan Stanley. 'Right now, markets are signalling they expect the situation in the Middle East to remain contained, but any surprises could have an oversized impact on sentiment.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
2 hours ago
- The Star
Stocks slip, oil jumps as Trump calls for Tehran evacuation
A woman walks past an electronic screen displaying the stock index prices of Asian countries outside a brokerage in Tokyo, Japan April 24, 2025. REUTERS/Issei Kato US stock futures slipped and oil prices rose on Tuesday, as investors were rattled by U.S. President Donald Trump's call for everyone to evacuate Tehran with the fifth-day of Israel-Iran fighting sowing fears of a broader regional conflict. Markets were on edge after a separate report said that Trump had asked for the national security council to be prepared in the situation room as he cut short his visit to the Group of Seven summit in Canada. Trump had earlier urged everyone to immediately evacuate Tehran, and reiterated that Iran should have signed a nuclear deal with the United States. The latest developments sparked a wave of risk-off moves in early Asian trading. S&P 500 futures fell 0.46%, European futures slumped 0.69%, while crude prices briefly jumped more than 2%. "Suspicion is that we're about to see the U.S. begin some sort of military action in Iran and we're now seeing some risk aversion because it brings another element of uncertainty into the market," said Tony Sycamore, a market analyst at IG. Wall Street had closed higher on Monday after sources told Reuters that Iran was seeking a Trump-mediated immediate ceasefire with Israel, which also cooled a rally in crude prices. The Iran-Israel air war - the biggest battle ever between the two longtime enemies - escalated on Monday with Israel targeting Iran's state broadcaster and uranium enrichment facilities. The heightened uncertainty and fluid Middle East situation bolstered investor moves towards traditional safe-haven assets such as gold which rose 0.5%, while a rise in U.S. Treasuries pushed yields lower across the curve. The yield on the benchmark 10-year note was down about 2 basis points at 4.43%. The dollar firmed against the euro, yen and sterling as it reprised its role as a safe asset even as it held to broadly tighter ranges. MSCI's broadest index of Asia-Pacific shares outside Japan was a tad higher, while futures tracking Hong Kong's Hang Seng index were also marginally higher. Outside of geopolitics, interest rate decisions by a host of central banks will be the prime focus for investors this week with the Bank of Japan's verdict expected later in the day. At the end of its two-day policy meeting, the BOJ is widely expected to maintain short-term interest rates at 0.5%, but markets will be keen on the institution's outlook on quantitative tightening. Japan's Nikkei edged up 0.5%, while the yen was slightly weaker at 144.96 per dollar. Investors are expecting the BOJ to consider slowing reductions in its bond purchases next year, as the central bank focuses on avoiding big market disruptions and tries to wean the economy off a decade-long, massive stimulus. It would be the first decision since the recent bond auctions had shown eroding appetite for freshly issued longer-dated debt and drove the country's bond yields to record highs. On Tuesday, yields on 30-year and 40-year bonds were broadly steady. In a week filled with central bank meetings across the globe, investors will be looking to comments from officials as they navigate Trump's erratic tariff policies and their impact on the global economy. The Federal Reserve is expected to hold rates steady on Wednesday but the focus yet again will be on the path Fed Chair Jerome Powell charts out for future rate cuts. Traders are pricing in two cuts by the end of the year. "To be a central banker right now is one challenging job and on top of the tariff situation, the trade policy and the inking of deals before deadlines you have this uncertainty from the Middle East," said IG's Sycamore. "Macro backdrops don't get any more tricky than what we're seeing at this point in time." In commodities, the risks of prolonged unrest in the Middle East and disruption to oil supply sent prices higher. Brent crude futures contract was last up 0.34% at $73.47 a barrel. West Texas Intermediate crude was last up 0.43% at $72.09. Gold prices were fetching $3,393.05 per ounce, up 0.3% on the day. - Reuters
The Star
2 hours ago
- The Star
Ringgit opens almost flat against US$ on cautious sentiment
KUALA LUMPUR: The ringgit opened flat against the US dollar on Tuesday as investors steered towards the sidelines amid cautious sentiment ahead of the two-day Federal Open Market Committee (FOMC) meeting beginning later today, said an analyst. At 8 am, the local note stood at 4.2360/2470 versus the greenback from yesterday's close of 4.2370/2450. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said market sentiment will likely remain in cautious mode as investors await the latest assessment by the US Federal Reserve (Fed) in view of current global geopolitical developments. "The focus now is on the two-day FOMC meeting, which will commence on June 17. "On that note, the ringgit is expected to stay flat as markets await the latest assessment by the Fed surrounding the current development,' he told Bernama. At the opening, the ringgit traded higher against a basket of major currencies. It rose versus the Japanese yen to 2.9266/9346 from 2.9397/9455 at Monday's close, strengthened against the British pound to 5.7461/7611 from 5.7555/7664, and increased vis-à-vis the euro to 4.8926/9053 from 4.9077/9170 previously. In the meantime, the ringgit was mostly flat against its ASEAN counterparts. It stood at 260.4/261.2 vis-à-vis the Indonesian rupiah and stayed at 7.51/7.53 against the Philippine peso. However, it inched up against the Singapore dollar to 3.3058/3149 from 3.3102/3167 at yesterday's close, but it fell versus the Thai baht to 13.0463/0866 from 13.0389/0696. - Bernama
The Star
2 hours ago
- The Star
Oil rises as Iran-Israel conflict spurs uncertainty
Fire rising from an oil depot following Israeli strikes in Teheran, Iran — Reuters SINGAPORE: Oil prices climbed on Tuesday on concerns the Iran-Israel conflict may intensify, raising the risk of further unrest and the potential disruption of oil supply from the key Middle East producing region. Brent crude futures rose 34 cents, or 0.5%, to $73.57 a barrel as of 0340 GMT. U.S. West Texas Intermediate crude was up 29 cents, or 0.4%, at $72.06. Both contracts rose more than 2% earlier in the trading session. Oil prices settled more than 1% lower on Monday on hopes that the conflict would ease after media reports Iran was seeking an end to hostilities. However, concerns have escalated after U.S. President Donald Trump in a social media post urged "everyone " to evacuate the Iranian capital of Tehran. Entering its fifth day on Tuesday, the fighting has continued with Iranian media reporting explosions and heavy air defence fire in Tehran. In Israel, air raid sirens sounded in Tel Aviv in response to Iranian missiles. "The conflict between Iran and Israel is still fresh and brewing, and investor sentiments may still be holding on to the 'war risks'," Priyanka Sachdeva, senior market analyst at Phillip Nova, said in an email. "Added volatility and caution ahead of the Fed policy decision are further ensuring higher-paced price reactions in oil," Sachdeva added, referring to the U.S. Federal Open Market Committee meeting, which guides interest rate decisions, that begins on Tuesday. Still, most of the market is focused on the uncertainty around the Iran-Israel hostilities. Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries. The concern is the fighting could disrupt its oil supply and raise prices. U.S. media on Monday night is reporting Trump is proposing renewed talks with Iran on a nuclear deal, even as other reports of an incident involving shipping in the Gulf of Oman highlight the risks to companies moving oil and fuel supplies in the region. - Reuters
