US stocks open muted as investors await Tehran's response to US strikes
The United States' bunker-busting entry into Israel's war with Iran is not upsetting the price of oil and stock markets on Monday, at least for now. The hope is that Iran won't retaliate in a way that disrupts the global flow of crude, which would hurt economies worldwide but also its own.
ADVERTISEMENT The S&P 500 was 0.4% higher in morning trading, coming off a week where stock prices had jumped up and down on worries about the conflict potentially escalating. The Dow Jones Industrial Average was up 156 points, or 0.4%, as of 10 a.m. Eastern time, and the Nasdaq composite was 0.3% higher.
The price of oil did jump more than 4% shortly after trading began on Sunday night, but it quickly pared back as the focus shifted from what the U.S. military did to how Iran would react.
By Monday morning, the price of a benchmark barrel of U.S. oil was down 0.4% at $73.56. Brent crude, the international standard, edged down by 0.2% to $76.82 per barrel. They still remain above where they were before the fighting began a little more than a week ago, when a barrel of benchmark U.S. crude was close to $68.The fear throughout has been that a worsening war could squeeze the world's supply of oil, which would pump up prices for it, gasoline and other products refined from crude. Not only is Iran a major producer of crude, it could also try to block access to the Strait of Hormuz off its coast, through which much of the world's oil passes each day on ships.The calming in the oil market came as several analysts said Iran would likely not close the waterway. Iran uses the strait to move its own crude, mostly to China, and it needs the revenue made from such sales of oil.
ADVERTISEMENT '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.'Neil Newman, managing director of Atris Advisory Japan, said hope remains that the Israel-Iran war could be a short conflict, with the thinking being 'the one big hit by the Americans will be effective and then we'll get back to sort of business as usual, in which case there is no need for an immediate, panicky type of reaction.'
ADVERTISEMENT Speaking to Fox News on Sunday, U.S. Secretary of State Marco Rubio said a disruption to traffic through the strait by Iran would be 'economic suicide' and would elicit a U.S. response.When asked about that at a routine briefing in Beijing, Chinese Foreign Ministry spokesperson Guo Jiakun told reporters that 'China is willing to strengthen communication with Iran and relevant parties to continue playing a constructive role in promoting de-escalation' of the conflict.
ADVERTISEMENT Of course, not everyone is sure about Iran's next move.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.
ADVERTISEMENT '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.'The Federal Reserve has been hesitant to lower interest rates, and it's been on hold this year after cutting at the end of last year, because it's waiting to see how much President Donald Trump's tariffs will hurt the economy and raise inflation.Inflation has remained relatively tame recently, and it's near the Fed's target of 2%, but a continued rise in oil and gasoline prices would put upward pressure on inflation. That in turn could keep the Fed on hold because cuts to rates can fan inflation higher, along with giving the economy a boost.A preliminary report on Monday suggested tariffs are pushing up prices for U.S. businesses, whose overall activity is growing by more than economists expected. The data from the survey 'corroborate speculation that the Fed will remain on hold for some time,' according to Chris Williamson, chief business economist at S&P Global Market Intelligence.In the bond market, Treasury yields eased as hopes continue that the Fed may cut interest rates later this year.The yield on the 10-year Treasury fell to 4.32% from 4.38% late Friday. The two-year Treasury yield, which more closely tracks expectations for the Fed, fell to 3.86% from 3.90%.On Wall Street, Elon Musk's Tesla was the single strongest force pushing the S&P 500 higher after rising 6.7%. The electric-vehicle company on Sunday began a test run of a small squad of self-driving cabs in Austin, Texas, something that Musk has long been touting.
In stock markets abroad, indexes fell modestly across Europe after finishing mixed in Asia. France's CAC 40 fell 0.9%, and Hong Kong's Hang Seng rose 0.7% for two of the world's bigger moves.
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