US stock futures faced bear-heavy trading on Sunday night as investors reacted to the US-Israeli bombing of Iran over the weekend.
The sale comes after President Donald Trump warned of possible casualties from Operation Epic Fury, joining the first reported, while the FBI is investigating last night’s mass shooting in Texas as a terrorist act.
Earlier, Mr. Trump said that the conflict with Iran may take time as he gets the administration to change its focus, saying on social media on Saturday that the bombing will continue “as long as necessary to achieve our goal of PEACE ON EARTH!
Futures tied to the Dow Jones industrial average fell 368 points, or 0.72%. S&P 500 futures were down 0.53%, and Nasdaq futures lost 0.54%.
US oil futures rose 6.1% to $75 a barrel, and Brent crude gained 6.6% to $77.56 In over-the-counter trading earlier on Sunday, Brent prices rose 10% to $80 a barrel, oil traders told Reuters. Iran pumped 400 million barrels per day last year, accounting for 4.4% of the world’s oil.
But the biggest risk lies in the possibility of Iran closing the Strait of Hormuz, through which a fifth of all the world’s oil passes on its way to export markets. Analysts have estimated that any steps taken by Iran to close the pipeline could send prices to $100 per barrel.
The Islamic Revolutionary Guards Corps reportedly warned the ship that it was not allowed to enter the channel, and said on Sunday it hit three oil tanks with mines. But even before this happened, the fear of such an attack stopped the movement of ships.
Hundreds of tankers carrying oil and natural gas have already dropped anchor when docked near the Strait of Hormuz, according to shipping data compiled by Reuters. That is after the owners of tankers, oil majors and trading houses stopped shipping goods through the strait on Saturday as a precautionary measure.
In addition, Greece’s shipping ministry has warned ships to avoid the Persian Gulf, the Gulf of Oman and the Strait of Hormuz. And shipping giant Maersk said it was suspending all ships crossing the peninsula until further notice.
The closure of this problem would be more difficult in Asia, since many economies in the region are major oil exporters whose sales channels depend on the opening of these channels, according to Idanna Appio, a portfolio manager and senior analyst who covers large debt and foreign exchange.
Alan Gelder, senior VP of refining, chemicals and oil markets at Wood Mackenzie, estimates that it could take a few weeks for exports to resume, even in the most optimistic scenario where Tehran cooperates with the US.
But until then, the price outlook has a heavy risk, he added in the letter, comparing it to what happened after Russia’s invasion of Ukraine in 2022, when oil hit $125 per barrel.
To be sure, the increase can reduce the stroke. OPEC+ agreed to boost oil production, with plans to increase 2600 barrels per day in April from its 137,000 monthly increase.
“However, there is a risk that the OPEC+ decision will be suspended if traffic does not resume through the Strait of Hormuz,” said Gelder.
Gold rose 2% to $5,353 per ounce, and silver rose 1.9% to $95.06. The yield on the 10-year Treasury was flat at 3.964%. The US dollar was up 0.28% against the euro and was up 0.28% against the yen.
Early signs from Asian financial markets, where the Aussie dollar is seen as something of a canary and was off about 0.26%, showed that investors were moving defensively but did not have prices in a serious error, said Appio, who manages First Eagle’s Global Income Builder fund.
“I don’t think this sounds like a water quality event,” he said Fortune.
As for the threat of governance in the Gulf, Iran has targeted Bahrain, Qatar, and the UAE with bombs and drones. The situation weighs on the region’s risk at the borders, but many of these chiefs carry strong sheets, Appio explained.
If anything, it may indicate a buying opportunity for investors rather than a structural collapse. The long-term question is whether the current conflict will be resolved in a way that reduces regional risk, but he said that is the situation for the future, not the week ahead.
Investors will also look forward to a busy week of economic indicators. On Monday, the Institute for Supply Management will release its monthly manufacturing activity index. On Wednesday, ADP will release its monthly independent payrolls data, and the Federal Reserve will release its beige book report on regional business and economic conditions. On Thursday, fourth-quarter manufacturing data is released. And on Friday, the Labor Department will release its monthly jobs list.
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