US equity futures fluctuate amid worries over Iran's oil flow disruption
US equity futures fluctuated as investors considered potential disruptions in oil flows due to rising tensions with Iran.
US equity futures fluctuated as investors weighed the risk of Iran disrupting Middle East oil flows in response to American strikes on its nuclear infrastructure. Crude prices trimmed earlier gains.
S&P 500 contracts were little changed after swinging between losses and gains. Brent crude pared an advance of as much as 5.7% to less than 1%, trading near $77.50 a barrel. The dollar strengthened 0.5% to its highest level this month, advancing against all Group-of-10 peers as traders hedged against the risk of further oil price gains.
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Oil, which has risen more than 10% since the onset of the Israel-Iran conflict, remained the central focus as any interruption to traffic through the Strait of Hormuz raises the specter of a spike in energy prices and higher inflation. Israel ratcheted up attacks on Iran on Monday after Tehran vowed to retaliate against US attacks on its nuclear facilities over the weekend.
“Markets are judging that the response may not be quite as dramatic, because Iran would risk antagonizing others who are not yet pulled in,” John Bilton, head of multi-asset strategy at JPMorgan Asset Management, told Bloomberg TV. The market is “absorbing a geopolitical event that is going on and judging that this does not, on face value, change the direction of travel.”
The market’s reaction had been generally muted since Israel’s initial assault on Iran this month. Even after falling for the past two weeks, the S&P 500 is only about 3% below its all-time high from February.
Additional losses may be contained, as some investors had already positioned for an escalation in the conflict. Equity exposure among fund managers has been trimmed while stocks are no longer in overbought territory.
The market’s sanguine reaction offers investors an opportunity to reduce their risk exposure further, noted Mohit Kumar, chief European strategist at Jefferies International.
“We don’t see a closure of the Hormuz strait but see possibility of disruption,” Kumar said. “Our base case would be a period of uncertainty lasting a few weeks, but without a sharp escalation.”
Global bonds swung to gains after earlier losses. The rate on 10-year Treasuries fell three basis points to 4.35%.
If Iran was to close the Strait of Hormuz, “a stagflation scenario with lower growth and higher inflation due to elevated oil prices is the main risk for markets,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “It would also curb the abilities of central banks to support markets.”
Corporate Highlights:
- Hims & Hers Health Inc. sinks more than 15% in premarket trading after Novo Nordisk A/S ends partnership. Novo fell as much as 5% in Copenhagen.
- Tesla Inc. rolled out its long-promised driverless taxi service to a handful of riders Sunday, a modest debut for what Elon Musk sees as a transformative new business line.
- A takeover battle for London healthcare REIT Assura Plc took a new turn after the board switched its recommendation from an all-cash private equity offer to a sweetened one by a listed player.
- British Airways and Singapore Airlines Ltd. canceled flights to the Persian Gulf, increasing aviation disruptions in the region after the US struck three nuclear sites in Iran and Tehran vowed to retaliate.
- Technology investor Prosus NV swung into profit for the first time, as it switches strategy under Chief Executive Officer Fabricio Bloisi.
- Buyout firm Advent reached an agreement to buy Spectris Plc, a UK maker of precision and testing equipment and software, for about £3.8 billion ($5.1 billion).
- Nomura Holdings Inc. more than doubled Kentaro Okuda’s pay last year, rewarding the chief executive officer for guiding Japan’s largest brokerage to a record annual profit.
- Stellantis NV is reorganizing its top management ranks as new Chief Executive Officer Antonio Filosa begins his push to turn around the struggling automaker.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 8:28 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average fell 0.1%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World Index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro fell 0.5% to $1.1463
- The British pound fell 0.5% to $1.3382
- The Japanese yen fell 1% to 147.55 per dollar
Cryptocurrencies
- Bitcoin rose 1.7% to $101,205.39
- Ether rose 2.7% to $2,248.33
Bonds
- The yield on 10-year Treasuries declined three basis points to 4.35%
- Germany’s 10-year yield was little changed at 2.51%
- Britain’s 10-year yield declined two basis points to 4.51%
Commodities
- West Texas Intermediate crude rose 0.6% to $74.27 a barrel
- Spot gold fell 0.2% to $3,362 an ounce
