Shares dip in Asia, oil up as world awaits Iran response
Wall Street share futures slipped on Monday and oil prices briefly hit five-month highs as investors anxiously waited to see if Iran would retaliate to U.S. attacks on its nuclear sites, with resulting risks to global activity and inflation.
Early moves were contained, with the U.S. dollar getting only a minor safe-haven bid and no sign of panic selling across markets. Oil prices were up around 2%, but already well off their initial peaks.
Optimists were hoping Iran might back down now its nuclear ambitions had been curtailed, or even that regime change might bring a less hostile government to power there.
Analysts at JPMorgan, however, cautioned that past episodes of regime change in the region typically resulted in oil prices spiking by as much as 76% and averaging a 30% rise over time.
Key will be access through the Strait of Hormuz, which is only about 33 km (21 miles) wide at its narrowest point and sees around 20% of the world's daily oil consumption.
'With the U.S. becoming involved, the risk of Iran retaliating by disrupting the flows of oil from the Middle East has risen significantly,' warned analysts at ANZ. 'Prices in the $90–95/bbl range would be the likely outcome.'
For now, Brent was up a relatively restrained 1.9% at $78.46 a barrel, while U.S. crude rose 2% to $75.30. Elsewhere in commodity markets, gold edged up 0.2% to $3,375 an ounce.
Share markets were proving resilient so far, with S&P 500 futures off 0.3% and Nasdaq futures down 0.5%, having both started with losses near 1%.
Nikkei futures were just a fraction lower at 38,380, pointing to a small opening fall for the cash index.
The dollar edged up 0.2% on the Japanese yen to 146.36 yen , while the euro dipped 0.3% to $1.1485. The dollar index firmed 0.25% to 99.008.
There was also no sign of a rush to the traditional safety of Treasuries, with futures up only 1 tick.
Futures for Federal Reserve interest rates were a tick lower, likely reflecting concerns a sustained rise in oil prices would add to inflationary pressures at a time when tariffs were just being felt in U.S. prices.
Markets are still pricing a slim chance the Fed will cut at its next meeting on July 30, even after Fed Governor Christopher Waller broke ranks and argued for a July easing.
Most other Fed members, including Chair Jerome Powell, have been more cautious on policy leading markets to wager a cut is far more likely in September.
At least 15 Fed officials are speaking this week, and Powell faces two days of questions from lawmakers, which is certain to cover the potential impact of President Donald Trump's tariffs and the attack on Iran.
The Middle East will be high on the agenda at a NATO leaders meeting at the Hague this week, where most members have agreed to commit to a sharp rise in defense spending. Among the economic data due are figures on U.S. core inflation and weekly jobless claims, along with early readings on June factory activity from across the globe.
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Globe and Mail
an hour ago
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Globe and Mail
4 hours ago
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Globe and Mail
6 hours ago
- Globe and Mail
Oil rises and US stock futures slip as markets react to US strike on Iran nuclear sites
NEW YORK (AP) — The price of oil rose and U.S. stock futures fell as global markets react to the U.S. strike against nuclear targets in Iran. The price of Brent crude oil, the international standard, rose 2.6% to $79 a barrel. U.S. crude rose 2.6% to $75.76 a barrel. On Saturday, U.S. forces attacked three Iranian nuclear and military sites, further increasing the stakes in the war between Israel and Iran. Futures for the S&P 500 and the Dow Jones Industrial Average slipped 0.3%, while Nasdaq futures fell 0.5%. Treasury yields were little changed. The modest moves indicate markets are taking the latest development in stride. The conflict, which began with an Israeli attack against Iran on June 13, has sent oil prices yo-yoing, which has in turn caused see-saw moves for the U.S. stock market, because of rising and ebbing fears that the war could disrupt the global flow of crude. Iran is a major producer of oil and also sits on the narrow Strait of Hormuz, through which much of the world's crude passes. An Iran retaliation that included closing off the waterway would be technically difficult to pull off but traders are afraid Iran could severely disrupt transit through it, sending insurance rates spiking and making shippers nervous to move without U.S. Navy escorts Some analysts think Iran is unlikely to close down the waterway because the country uses it to transport its own crude, mostly to China, and oil is a major source of revenue for the regime. 'It's a scorched earth possibility, a Sherman-burning-Atlanta move,' said Tom Kloza, chief market analyst at Turner Mason & Co. "It's not probable.' Kloza thinks oil futures will ease back down after initial fears blow over. Ed Yardeni, a long-time analyst, agreed, writing in a report that Tehran leaders would likely hold back. 'They aren't crazy,' he wrote in a note to investors Sunday. 'The price of oil should fall and stock markets around the world should climb higher.' Other experts aren't so sure. Andy Lipow, a Houston analyst covering oil markets for 45 years, said countries are not always rational actors and that he wouldn't be surprised if Tehran lashed out for political or emotional reasons. 'If the Strait of Hormuz was completely shut down, oil prices would rise to $120 to $130 a barrel,' said Lipow, predicting that that would translate to about $4.50 a gallon at the pump and hurt consumers in other ways. 'It would mean higher prices for all those goods transported by truck, and it would be more difficult for the Fed to lower interest rates.'
