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Qatar Tribune
a day ago
- Business
- Qatar Tribune
Middle East tensions put investors on alert
Agencies New York Investors are mulling a host of different market scenarios should the US deepen its involvement in the Middle East conflict, with the potential for ripple effects if energy prices skyrocket. They have honed in on the evolving situation between Israel and Iran, which have exchanged missile strikes, and are closely monitoring whether the US decides to join Israel in its bombing campaign. Potential scenarios could send inflation higher, dampening consumer confidence and lessening the chance of near-term interest rate cuts. This would likely cause an initial selloff in equities and possible safe-haven bid for the dollar. While US crude prices have climbed some 10 percent over the past week, the S&P 500 has been little changed as of yet, following an initial drop when Israel launched itsattacks. However, if attacks were to take out Iranian oil supply, 'that's when the market is going to sit up and take notice,' said Art Hogan, chief market strategist at B Riley Wealth. 'If you get disruption to supply of oil product on the global marketplace, that is not reflected in today's WTI price and that is where things get negative,' Hogan said. The White House said on Thursday President Donald Trump would decide on US involvement in the conflict in the next two weeks. Analysts at Oxford Economics modeled three scenarios, ranging from a de-escalation in the conflict, a complete shutdown in Iranian production, and a closure of the Strait of Hormuz, 'each with increasingly large impacts on global oil prices,' the firm said in a note. In the most severe case, global oil prices jump to around $130 per barrel, driving US inflation near 6% by the end of this year, Oxford said in the note. 'Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year,' Oxford said in the note. The biggest market impact from the escalating conflict has been restricted to oil, with oil prices soaring on worries that the Iran-Israel conflict could disrupt supplies. Brent crude futures have risen as much as 18% since June 10, hitting a near five-month high of $79.04 on Thursday. The accompanying rise in investors' expectations for further near-term volatility in oil prices has outpaced the rise in volatility expectations for other major asset classes, including stocks and bonds. But other asset classes, including stocks, could still feel the knock-on effects of higher oil prices, especially if there is a larger surge in oil prices if the worst market fears of supply disruptions come true, analysts said. 'Geopolitical tensions have been mostly ignored by equities, but they are being factored into oil,' Citigroup analysts wrote in a note. 'To us, the key for equities from here will come from energy commodity pricing,' they said. US stocks have so far weathered rising Middle East tensions with little sign of panic. A more direct US involvement in the conflict could, however, spook markets, investors said.
The Sun
2 days ago
- Business
- The Sun
Middle East tensions put investors on alert, weighing worst-case scenarios
NEW YORK: Investors are mulling a host of different market scenarios should the U.S. deepen its involvement in the Middle East conflict, with the potential for ripple effects if energy prices skyrocket. They have honed in on the evolving situation between Israel and Iran, which have exchanged missile strikes, and are closely monitoring whether the U.S. decides to join Israel in its bombing campaign. Potential scenarios could send inflation higher, dampening consumer confidence and lessening the chance of near-term interest rate cuts. This would likely cause an initial selloff in equities and possible safe-haven bid for the dollar. While U.S. crude prices have climbed some 10% over the past week, the S&P 500 has been little changed as of yet, following an initial drop when Israel launched its attacks. However, if attacks were to take out Iranian oil supply, 'that's when the market is going to sit up and take notice,' said Art Hogan, chief market strategist at B Riley Wealth. 'If you get disruption to supply of oil product on the global marketplace, that is not reflected in today's WTI price and that is where things get negative,' Hogan said. The White House said on Thursday President Donald Trump would decide on U.S. involvement in the conflict in the next two weeks. Analysts at Oxford Economics modeled three scenarios, ranging from a de-escalation in the conflict, a complete shutdown in Iranian production, and a closure of the Strait of Hormuz, 'each with increasingly large impacts on global oil prices,' the firm said in a note. In the most severe case, global oil prices jump to around $130 per barrel, driving U.S. inflation near 6% by the end of this year, Oxford said in the note. 'Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the U.S. this year,' Oxford said in the note. OIL IMPACT The biggest market impact from the escalating conflict has been restricted to oil, with oil prices soaring on worries that the Iran-Israel conflict could disrupt supplies. Brent crude futures have risen as much as 18% since June 10, hitting a near 5-month high of $79.04 on Thursday. The accompanying rise in investors' expectations for further near-term volatility in oil prices has outpaced the rise in volatility expectations for other major asset classes, including stocks and bonds. But other asset classes, including stocks, could still feel the knock-on effects of higher oil prices, especially if there is a larger surge in oil prices if the worst market fears of supply disruptions come true, analysts said. 'Geopolitical tensions have been mostly ignored by equities, but they are being factored into oil,' Citigroup analysts wrote in a note. 'To us, the key for equities from here will come from energy commodity pricing,' they said. STOCKS UNPERTURBED U.S. stocks have so far weathered rising Middle East tensions with little sign of panic. A more direct U.S. involvement in the conflict could, however, spook markets, investors said. Financial markets may be in for an initial selloff if the U.S. military attacks Iran, with economists warning 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% 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. 'Traders are likely to worry more about the implicit erosion of the terms of trade for Europe, the UK, and Japan, rather than the economic shock to the US, a major oil producer,' Thierry Wizman, Global FX & Rates Strategist at Macquarie Group, said in a note. But longer-term, the prospect of US-directed 'nation-building' would probably weaken the dollar, he said. 'We recall that after the attacks of 9/11, and running through the decade-long US presence in Afghanistan and Iraq, the USD weakened,' Wizman said.
The Sun
2 days ago
- Business
- The Sun
Markets eye oil, inflation risks as US mulls Mideast role
NEW YORK: Investors are mulling a host of different market scenarios should the U.S. deepen its involvement in the Middle East conflict, with the potential for ripple effects if energy prices skyrocket. They have honed in on the evolving situation between Israel and Iran, which have exchanged missile strikes, and are closely monitoring whether the U.S. decides to join Israel in its bombing campaign. Potential scenarios could send inflation higher, dampening consumer confidence and lessening the chance of near-term interest rate cuts. This would likely cause an initial selloff in equities and possible safe-haven bid for the dollar. While U.S. crude prices have climbed some 10% over the past week, the S&P 500 has been little changed as of yet, following an initial drop when Israel launched its attacks. However, if attacks were to take out Iranian oil supply, 'that's when the market is going to sit up and take notice,' said Art Hogan, chief market strategist at B Riley Wealth. 'If you get disruption to supply of oil product on the global marketplace, that is not reflected in today's WTI price and that is where things get negative,' Hogan said. The White House said on Thursday President Donald Trump would decide on U.S. involvement in the conflict in the next two weeks. Analysts at Oxford Economics modeled three scenarios, ranging from a de-escalation in the conflict, a complete shutdown in Iranian production, and a closure of the Strait of Hormuz, 'each with increasingly large impacts on global oil prices,' the firm said in a note. In the most severe case, global oil prices jump to around $130 per barrel, driving U.S. inflation near 6% by the end of this year, Oxford said in the note. 'Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the U.S. this year,' Oxford said in the note. OIL IMPACT The biggest market impact from the escalating conflict has been restricted to oil, with oil prices soaring on worries that the Iran-Israel conflict could disrupt supplies. Brent crude futures have risen as much as 18% since June 10, hitting a near 5-month high of $79.04 on Thursday. The accompanying rise in investors' expectations for further near-term volatility in oil prices has outpaced the rise in volatility expectations for other major asset classes, including stocks and bonds. But other asset classes, including stocks, could still feel the knock-on effects of higher oil prices, especially if there is a larger surge in oil prices if the worst market fears of supply disruptions come true, analysts said. 'Geopolitical tensions have been mostly ignored by equities, but they are being factored into oil,' Citigroup analysts wrote in a note. 'To us, the key for equities from here will come from energy commodity pricing,' they said. STOCKS UNPERTURBED U.S. stocks have so far weathered rising Middle East tensions with little sign of panic. A more direct U.S. involvement in the conflict could, however, spook markets, investors said. Financial markets may be in for an initial selloff if the U.S. military attacks Iran, with economists warning 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% 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. 'Traders are likely to worry more about the implicit erosion of the terms of trade for Europe, the UK, and Japan, rather than the economic shock to the US, a major oil producer,' Thierry Wizman, Global FX & Rates Strategist at Macquarie Group, said in a note. But longer-term, the prospect of US-directed 'nation-building' would probably weaken the dollar, he said. 'We recall that after the attacks of 9/11, and running through the decade-long US presence in Afghanistan and Iraq, the USD weakened,' Wizman said.
Business Times
5 days ago
- Business
- Business Times
US: Stocks drop on growing worries over Middle East
[NEW YORK] Wall Street stocks fell on Tuesday (Jun 17) after US President Donald Trump hardened his rhetoric on the fighting between Iran and Israel, sparking worries of a broadening conflict. In social media posts, Trump appeared to demand Iran's 'unconditional surrender!' while hinting at a possible US intervention as the fighting moved into its fifth day. 'It's not going in the right direction,' Art Hogan, chief market strategist of B Riley Wealth, said of Tuesday's tone after markets had advanced on Monday on hopes the conflict was contained. The Dow Jones Industrial Average finished down 0.7 per cent at 42,215.80. The broad-based S&P 500 dropped 0.8 per cent to 5,982.72, while the tech-rich Nasdaq Composite Index shed 0.9 per cent to 19,521.09. Anxiety about Iran and Israel has emerged as the market's focal point at a time when investors are also watching the Federal Reserve, which opened a two-day monetary policy meeting. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The Fed is expected to keep interest rates steady as it eschews interest rate cuts for now while monitoring the effects of Trump's tariffs on inflation. On Wednesday, the Fed is also due to release its latest economic projections on growth, unemployment and inflation. Markets digested weaker than expected US economic data. Overall US retail sales fell in May by 0.9 per cent from April to US$715.4 billion, figures that suggested a pullback from April's surge in buying to beat out tariffs. While 10 of 11 sectors in the S&P 500 retreated, the exception was energy, which was buoyed by higher oil prices. Defense-related stocks were another gainer, with Lockheed Martin winning 2.6 per cent and Northrop Grumman 1.2 per cent. AFP
RTHK
5 days ago
- Business
- RTHK
US stocks drop on growing worries over Middle East
US stocks drop on growing worries over Middle East Anxiety about Iran and Israel has emerged as Wall Street's focal point. Photo: AFP Wall Street stocks fell on Tuesday after US President Donald Trump hardened his rhetoric on the fighting between Iran and Israel, sparking worries of a broadening conflict. In social media posts, Trump appeared to demand Iran's "UNCONDITIONAL SURRENDER!" while hinting at a possible US intervention as the fighting moved into its fifth day. "It's not going in the right direction," Art Hogan, chief market strategist of B Riley Wealth, said of Tuesday's tone after markets had advanced on Monday on hopes the conflict was contained. The Dow Jones finished down 0.7 percent at 42,215. The S&P 500 dropped 0.8 percent to 5,982, while the Nasdaq shed 0.9 percent to 19,521. Anxiety about Iran and Israel has emerged as the market's focal point at a time when investors are also watching the Federal Reserve, which opened a two-day monetary policy meeting. The Fed is expected to keep interest rates steady as it eschews interest rate cuts for now while monitoring the effects of Trump's tariffs on inflation. On Wednesday, the Fed is also due to release its latest economic projections on growth, unemployment and inflation. Markets digested weaker than expected US economic data. Overall US retail sales fell in May by 0.9 percent from April to US$715.4 billion, figures that suggested a pullback from April's surge in buying to beat out tariffs. While 10 of 11 sectors in the S&P 500 retreated, the exception was energy, which was buoyed by higher oil prices. Defence-related stocks were another gainer, with Lockheed Martin winning 2.6 percent and Northrop Grumman 1.2 percent. (AFP)
