Oil flip-flops and shares are mixed after the US strikes Iranian nuclear sites

Chicago Tribune

3 hours ago

BANGKOK — Global markets appeared to take the U.S. strike against nuclear targets in Iran in stride as investors watched Monday to see how Iran will react.
The price of oil initially jumped more than 2%, fell and then regained about half that much. U.S. stock futures edged lower and share benchmarks in Europe and Asia also were mostly lower.
The attacks on three Iranian sites raised the stakes in the war between Israel and Iran and left questions about what remains of Tehran's nuclear program. It also increased the possibility that Iran might retaliate, potentially disrupting shipping through the narrow Strait of Hormuz, a waterway through which much of the world's crude oil passes.
The big unknown is what Iran will do, analysts said.
The price of Brent crude oil, the international standard, was up 1.2% at $77.91 per barrel. U.S. benchmark crude climbed 1.3% to $74.79.
The future for the S&P 500 was little changed, while that for the Dow Jones Industrial Average was down 0.1%. Treasury yields were steady.
In Europe, Germany's DAX lost 0.5% to 23,230.54 and the CAC 40 in Paris fell 0.6% to 7,541.25. Britain's FTSE 100 shed 0.2% to 8,761.53.
Overall, there was no sign of panic.
'I believe what we are thinking is or the thinking is that it is going to be a short conflict. 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,' said Neil Newman, managing director of Atris Advisory Japan.
The conflict began with an Israeli attack against Iran on June 13 that sent oil prices yo-yoing and rattled other markets.
Closing off the Strait of Hormuz would be technically difficult but it could severely disrupt transit through it, sending insurance rates spiking and making shippers nervous to move without U.S. Navy escorts. As a major oil producer, Iran may be reluctant to close down the waterway, which is used to transport its own crude, mostly to China. Oil is a major revenue source for the regime.
'The situation remains highly fluid, and much hinges on whether Tehran opts for a restrained reaction or a more aggressive course of action,' Kristian Kerr, head of macro strategy at LPL Financial in Charlotte, North Carolina, said in a commentary.
Speaking to Fox News on Sunday, U.S. Secretary of State Marco Rubio said disrupting traffic through the strait would be 'economic suicide' and would elicit a U.S. response.
'I would encourage the Chinese government in Beijing to call them about that because they heavily depend on the Strait of Hormuz for their oil,' Rubio said.
When asked about that at a routine briefing in Beijing, Chinese Foreign Ministry spokesperson Guo Jiakun told reporters in Beijing 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.
'The Persian Gulf and its adjacent waters are important international channels for cargo and energy trade. Maintaining security and stability in this region serves the common interests of the international community,' he said.
Tom Kloza, chief market analyst at Turner Mason & Co said he expects Iranian leaders to refrain from drastic measures and oil futures to ease back after the initial fears blow over.
Disrupting shipping would be ' a scorched earth possibility, a Sherman-burning-Atlanta move,' Kloza said.
Writing in a report, Ed Yardeni, a long-time analyst, agreed 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 weren't so sure.
Countries are not always rational actors and Tehran could lash out for political or emotional reasons, said Andy Lipow, a Houston analyst who has covered oil markets for 45 years.
'If the Strait of Hormuz was completely shut down, oil prices would rise to $120 to $130 a barrel,' Lipow said. That would translate to about $4.50 a gallon at the pump and hurt consumers in other ways, he said.
Much of East Asia depends on oil imported through the strait. Taiwan's Taiex fell 1.4% while the Kospi in South Korea slipped 0.2%.
In Tokyo, the Nikkei 225 edged 0.1% lower, with gains for defense contractors, oil companies and miners helping to make up for broad losses.
'The U.S. strike on Iran certainly is very good for defense equipment,' Newman of Atris Advisory said, noting that both Japan and South Korea have sizable military manufacturing hubs.
Australia's S&P/ASX fell 0.4%.
Hong Kong's Hang Seng regained lost ground, climbing 0.7%, while the Shanghai Composite index picked up 0.7%.
In currency dealings, the U.S. dollar rose to 147.82 Japanese yen from 146.66 yen. The euro fell to $1.1464 from $1.1473.