Investors brace for oil price spike after US bombs Iran nuclear sites
A US attack on Iranian nuclear sites could push oil prices even higher and trigger a knee-jerk rush to safety, investors said, as they assessed how the latest escalation of tensions would ripple through the global economy.
The reaction in Middle East stock markets, which trade on Sunday, suggested investors were assuming a benign scenario, even as Iran intensified its missile attacks on Israel in response to the sudden, deep US involvement in the conflict.
Trump said Iran's "key nuclear enrichment facilities have been completely and totally obliterated" and added that the US military could go after other targets in Iran if the country did not agree to peace.
Iran said it reserves all options to defend itself, and warned of "everlasting consequences".
Investors said they expected the US involvement would cause a selloff in stock markets and a possible bid for the dollar and other safe-haven assets when major markets reopen, but also said much uncertainty about the course of the conflict remained. "I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital.
"We don't have any damage assessment and that will take some time. Even though he has described this as 'done', we're engaged. What comes next?" Spindel said. "I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil," he added.
One indicator of how markets will react in the coming week was the price of ether, the second-largest cryptocurrency and the new gauge of retail investor sentiment after bitcoin, which is now held largely by institutions.
Ether was down 5 per cent on Sunday, taking losses since the first Israeli strikes on Iran on June 13 to 13 per cent.
Most Gulf stock markets, however, seemed unconcerned by the early morning attacks, with the main indexes in Qatar, Saudi Arabia and Kuwait up slightly and Israel's Tel Aviv main index at an all-time high.
OIL PRICES, INFLATION
A key concern for markets would centre around the potential impact of the developments in the Middle East on oil prices and thus on inflation. A rise in inflation could dampen consumer confidence and lessen the chance of near-term interest rate cuts.
Saul Kavonic, a senior energy analyst at equity research firm MST Marquee in Sydney, said the more likely scenario would see Iran respond by targeting American interests in the Middle East, including Gulf oil infrastructure in places such as Iraq or harassing ship passages through the Strait of Hormuz.
The Strait of Hormuz lies between Oman and Iran and is the primary export route for oil producers such as Saudi Arabia, the UAE Iraq and Kuwait.
"Much depends on how Iran responds in the coming hours and days, but this could set us on a path towards $100 oil if Iran respond as they have previously threatened to," Kavonic said. While global benchmark Brent crude futures LCOc1 have risen as much as 18 per cent since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13.
In comments after Trump announced the strikes, Jamie Cox, managing partner at Harris Financial Group, agreed oil prices would likely spike on the initial news. But Cox said he expected prices to likely level off in a few days as the attacks could lead Iran to seek a peace deal with Israel and the United States.
Economists warn that a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs.
Still, any pullback in equities might be fleeting, history suggests. During past prominent instances of Middle East tensions coming to a boil, including the 2003 Iraq invasion and the 2019 attacks on Saudi oil facilities, stocks initially languished but soon recovered to trade higher in the months ahead.
On average, the S&P 500 slipped 0.3 per cent in the three weeks following the start of conflict, but was 2.3 per cent higher on average two months following the conflict, according to data from Wedbush Securities and CapIQ Pro.
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Gulf Today
8 hours ago
- Gulf Today
Global investors bracing for a knee-jerk selloff in stock markets
Investors are bracing for a knee-jerk selloff in stock markets after the weekend's US attack on Iran raised the specter of retaliation and higher oil prices. The Middle East situation takes center-stage for markets, overshadowing US economic data releases this week, as investors assess the impact of President Donald Trump's sudden decision to join Israel's military campaign against Iran on sentiment, inflation and interest rates. Trump called the attack "a spectacular military success" in a televised address to the nation and said Iran's nuclear enrichment facilities had been "obliterated". He said the US military could go after other targets in Iran if the country did not agree to peace. "It's hard to imagine stocks not reacting negatively and the question is how much. It will depend on Iranian reaction and whether oil prices spike," said Steve Sosnick, chief market strategist at Interactive Brokers in Connecticut. "Really what we're looking at is secondary order effects - the price of oil, market stability, price hikes through the economy. No globally important stock is directly affected by what happened tonight.' The S&P 500 is hovering just below its February highs but has rebounded sharply from its early-April selloff, as tariff-related tensions have eased. However, the US benchmark index appears to be taking a breather at some 2.7% below its February closing high. The index has gone 27 trading sessions since coming within 5% of its February high but has not yet set a new record. The Israel-Iran conflict has already sent oil prices sharply higher and led to caution in markets. So far, the oil market has absorbed most of the impact from geopolitical turmoil, with equities relatively stable. Yet stock investors remain concerned that higher oil prices could stoke inflation and upset plans for interest rate cuts from the Federal Reserve. On Wednesday, the Fed held rates steady and policymakers signaled borrowing costs are still likely to fall this year. But they estimated the overall pace of expected future rate cuts would be slower than they saw at their March meeting. They cited expectations that higher inflation would flow from President Donald Trump's tariff plans. "The question is oil prices and what that does to inflation - which has implications for monetary policy and how long the Fed keeps rates "meaningfully restrictive"," said Sonu Varghese, global macro strategist at Carson Group. While investors expect the Middle East tensions to spur a near-term bout of nervousness in stock markets and a rush to safer assets such as the dollar and Treasuries, some also envisage a de-escalation in the situation. "I think it's going to be very positive for the stock market," said Mark Malek, chief investment officer of Siebert Financial, referring to how investors had been primed for two weeks of uncertainty based on White House statements that Trump would take that long to decide on his next move. "So this will be reassuring, especially since it seems like a one and done situation and not as if (the US) is seeking a long-drawn out conflict." Investors will also parse a slew of incoming data releases, including US business activity and housing sales on Monday, consumer confidence numbers on Tuesday and the PCE Price Index on Friday. US consumer confidence plunged in the past few months, with households fearing tariffs could prompt a recession and higher inflation. However, with inflation in check and the US reaching a truce in its trade fight with China, investors were expecting to see a pickup in sentiment. "Remember, the survey-based data all got crushed in the March, April, May time frame ... my expectation is we're still going to see an improvement," Mark Hackett, chief market strategist at Nationwide said before the US struck Iran. A key concern for markets would centre around the potential impact of the developments in the Middle East on oil prices and thus on inflation. A rise in inflation could dampen consumer confidence and lessen the chance of near-term interest rate cuts. Saul Kavonic, a senior energy analyst at equity research firm MST Marquee in Sydney, said the more likely scenario would see Iran respond by targeting American interests in the Middle East, including Gulf oil infrastructure in places such as Iraq or harassing ship passages through the Strait of Hormuz. The Strait of Hormuz lies between Oman and Iran and is the primary export route for oil producers such as Saudi Arabia, the United Arab Emirates, Iraq and Kuwait. "Much depends on how Iran responds in the coming hours and days, but this could set us on a path towards $100 oil if Iran respond as they have previously threatened to," Kavonic said. While global benchmark Brent crude futures have risen as much as 18% since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13. "Much depends on how Iran responds in the coming hours and days, but this could set us on a path towards $100 oil if Iran respond as they have previously threatened to," Kavonic said. While global benchmark Brent crude futures have risen as much as 18% since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13. Reuters
Dubai Eye
8 hours ago
- Dubai Eye
Investors brace for oil price spike after US bombs Iran nuclear sites
A US attack on Iranian nuclear sites could push oil prices even higher and trigger a knee-jerk rush to safety, investors said, as they assessed how the latest escalation of tensions would ripple through the global economy. The reaction in Middle East stock markets, which trade on Sunday, suggested investors were assuming a benign scenario, even as Iran intensified its missile attacks on Israel in response to the sudden, deep US involvement in the conflict. Trump said Iran's "key nuclear enrichment facilities have been completely and totally obliterated" and added that the US military could go after other targets in Iran if the country did not agree to peace. Iran said it reserves all options to defend itself, and warned of "everlasting consequences". Investors said they expected the US involvement would cause a selloff in stock markets and a possible bid for the dollar and other safe-haven assets when major markets reopen, but also said much uncertainty about the course of the conflict remained. "I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital. "We don't have any damage assessment and that will take some time. Even though he has described this as 'done', we're engaged. What comes next?" Spindel said. "I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil," he added. One indicator of how markets will react in the coming week was the price of ether, the second-largest cryptocurrency and the new gauge of retail investor sentiment after bitcoin, which is now held largely by institutions. Ether was down 5 per cent on Sunday, taking losses since the first Israeli strikes on Iran on June 13 to 13 per cent. Most Gulf stock markets, however, seemed unconcerned by the early morning attacks, with the main indexes in Qatar, Saudi Arabia and Kuwait up slightly and Israel's Tel Aviv main index at an all-time high. OIL PRICES, INFLATION A key concern for markets would centre around the potential impact of the developments in the Middle East on oil prices and thus on inflation. A rise in inflation could dampen consumer confidence and lessen the chance of near-term interest rate cuts. Saul Kavonic, a senior energy analyst at equity research firm MST Marquee in Sydney, said the more likely scenario would see Iran respond by targeting American interests in the Middle East, including Gulf oil infrastructure in places such as Iraq or harassing ship passages through the Strait of Hormuz. The Strait of Hormuz lies between Oman and Iran and is the primary export route for oil producers such as Saudi Arabia, the UAE Iraq and Kuwait. "Much depends on how Iran responds in the coming hours and days, but this could set us on a path towards $100 oil if Iran respond as they have previously threatened to," Kavonic said. While global benchmark Brent crude futures LCOc1 have risen as much as 18 per cent since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13. In comments after Trump announced the strikes, Jamie Cox, managing partner at Harris Financial Group, agreed oil prices would likely spike on the initial news. But Cox said he expected prices to likely level off in a few days as the attacks could lead Iran to seek a peace deal with Israel and the United States. Economists warn that a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs. Still, any pullback in equities might be fleeting, history suggests. During past prominent instances of Middle East tensions coming to a boil, including the 2003 Iraq invasion and the 2019 attacks on Saudi oil facilities, stocks initially languished but soon recovered to trade higher in the months ahead. On average, the S&P 500 slipped 0.3 per cent in the three weeks following the start of conflict, but was 2.3 per cent higher on average two months following the conflict, according to data from Wedbush Securities and CapIQ Pro.
Zawya
9 hours ago
- Zawya
Investors brace for oil price spike, rush to havens after US bombs Iran nuclear sites
NEW YORK: A U.S. attack on Iranian nuclear sites could push oil prices even higher and trigger a knee-jerk rush to safety, investors said, as they assessed how the latest escalation of tensions would ripple through the global economy. The reaction in Middle East stock markets, which trade on Sunday, suggested investors were assuming a benign outcome, even as Iran intensified its missile attacks on Israel in response to the sudden, deep U.S. involvement in the conflict. U.S. President Donald Trump called the attack "a spectacular military success" in a televised address to the nation and said Iran's "key nuclear enrichment facilities have been completely and totally obliterated". He said the U.S. military could go after other targets in Iran if the country did not agree to peace. Iran said it reserves all options to defend itself, and warned of "everlasting consequences". Speaking in Istanbul, Iran's Foreign Minister Abbas Araqchi said Tehran was weighing its options for retaliation and would consider diplomacy only after carrying out its response. Investors said they expected U.S. involvement would cause a stock market selloff and a possible bid for the dollar and other safe-haven assets when major markets reopen, but also said much uncertainty remained. "I think the markets are going to be initially alarmed, and I think oil will open higher," said Mark Spindel, chief investment officer at Potomac River Capital. "We don't have any damage assessment and that will take some time. Even though (Trump) has described this as 'done', we're engaged," Spindel said. "I think the uncertainty is going to blanket the markets, as now Americans everywhere are going to be exposed. It's going to raise uncertainty and volatility, particularly in oil," he added. One indicator of how markets will react in the coming week was the price of ether, the second-largest cryptocurrency and a gauge of retail investor sentiment. Ether was down 8.5% on Sunday, taking losses since the first Israeli strikes on Iran on June 13 to 13%. Most Gulf stock markets, however, seemed unconcerned by the early morning attacks, with the main indexes in Qatar, Saudi Arabia and Kuwait up slightly or flat. Israel's Tel Aviv main index was at an all-time high. OIL PRICES, INFLATION A key concern for markets centers around the potential impact of Middle East developments on oil prices and thus on inflation. Rising inflation could dampen consumer confidence and lessen the chance of near-term interest rate cuts. Saul Kavonic, a senior energy analyst at equity research firm MST Marquee in Sydney, said Iran could respond by targeting American interests in the Middle East, including Gulf oil infrastructure in places such as Iraq or harassing ship passages through the Strait of Hormuz. The Strait of Hormuz lies between Oman and Iran and is the primary export route for oil producers such as Saudi Arabia, the United Arab Emirates, Iraq and Kuwait. "Much depends on how Iran responds in the coming hours and days, but this could set us on a path towards $100 oil if Iran respond as they have previously threatened to," Kavonic said. While global benchmark Brent crude futures have risen as much as 18% since June 10, hitting a near five-month high of $79.04 on Thursday, the S&P 500 has been little changed, following an initial drop when Israel launched its attacks on Iran on June 13. Jamie Cox, managing partner at Harris Financial Group, said oil prices would likely spike before leveling off in a few days as the attacks could lead Iran to seek a peace deal with Israel and the United States. "With this demonstration of force and total annihilation of its nuclear capabilities, they've lost all of their leverage and will likely hit the escape button to a peace deal," Cox said. Economists warn that a dramatic rise in oil prices could damage a global economy already strained by Trump's tariffs. Still, any pullback in equities might be fleeting, history suggests. During past eruptions of Middle East tensions, including the 2003 Iraq invasion and the 2019 attacks on Saudi oil facilities, stocks initially languished but soon recovered to trade higher in the months ahead. On average, the S&P 500 slipped 0.3% in the three weeks following the start of conflict, but was 2.3% higher on average two months following the conflict, according to data from Wedbush Securities and CapIQ Pro. DOLLAR WOES An escalation in the conflict could have mixed implications for the U.S. dollar, which has tumbled this year amid worries over diminished U.S. exceptionalism. In the event of U.S. direct engagement in the Iran-Israel war, the dollar could initially benefit from a safety bid, analysts said. "Do we see a flight to safety? That would signal yields going lower and the dollar getting stronger," said Steve Sosnick, chief market strategist at IBKR in Greenwich, Connecticut. "It's hard to imagine stocks not reacting negatively and the question is how much." Jack McIntyre, portfolio manager for global fixed income at Brandywine Global Investment Management in Philadelphia, said it was uncertain whether U.S. Treasuries would rally after the U.S. attack, largely due to the market's hypersensitivity to inflation. "This could lead to regime change (which) ultimately could have a much bigger impact on the global economy if Iran shifts towards a more friendly, open economic regime," said McIntyre. (Reporting by Saqib Iqbal Ahmed, Lewis Krauskopf, Suzanne McGee, Saeed Azhar, Matt Tracy, Vidya Ranganathan and Federico Maccioni; Editing by Megan Davies, Peter Henderson, Jamie Freed and Nia Williams)
