Stocks fell on Monday as the Middle East conflict added geopolitical risks to interest rate and inflation concerns already facing markets.
The Dow Jones Industrial Average (^DJI) fell by about 0.2%. The S&P 500 (^GSPC) fell about 0.5%, and the tech-heavy Nasdaq Composite Index (^IXIC) contract fell nearly 1%.
The Islamic extremist group Hamas launched a major attack on Israel on Saturday and declared war in response. This has spooked markets, with investors worried about a new full-scale conflict joining Russia and Ukraine’s already active war.
“Geopolitical risks don’t tend to linger in markets for long, but there could be a number of fallout effects in the weeks, months and years after this weekend’s developments,” said Jim Reid, a strategist at Deutsche Bank. There is,” he said.
Oil prices rose as much as 5% after the attack, amid speculation that the region’s major oil producers could be drawn into the conflict. As the battle enters its third day, WTI crude oil futures (CL=F) and Brent crude oil futures (BZ=F) were up more than 3% at last check. On the other hand, there was demand for safe-haven assets such as gold (GC=F) and government bonds.
If oil prices continue to rise, they could add to inflationary pressures that already have investors bracing for further interest rate hikes by the Federal Reserve.
Read more: What the Fed’s rate hike pause means for bank accounts, CDs, loans, and credit cards
The surprisingly strong September jobs report released on Friday is just the latest data to confirm the need for tougher policy, with investors increasingly coming to grips with the reality that borrowing costs are likely to remain high for an extended period of time. confronting.
The recent rise in bond yields to 16-year highs spooked investors, who were already concerned about the economic impact of further interest rate hikes, and weighed on stock prices.
But it could give the Fed reason to pause rate hikes, given that some officials believe the bond crash is likely to lead to a significant tightening of credit. US Treasury trading will be closed on Monday as it is a US holiday.
The next most important economic indicator will be the Consumer Price Index (CPI) for September, which will be released on Thursday, with headline inflation expected to decline slightly. The release of minutes from the Fed’s last meeting this week should provide further insight into policymakers’ thinking on the path of interest rates.
Oil prices soar amid rising geopolitical concerns
Oil prices rose nearly 4% on Monday morning as a surprise attack on Israel by the Palestinian Islamic extremist group Hamas raised fears of widespread conflict in the Middle East.
West Texas Intermediate (CL=F) and Brent International (BZ=F) futures rose about 4% to around $86 and $88 a barrel, respectively.
Over the weekend, Hamas launched its largest military attack on Israel in decades.Prime Minister Benjamin Netanyahu said on monday He claimed that Israel’s response to the attack would “change the Middle East.”
The Middle East accounts for more than 30% of the world’s oil production.
“There was no disruption to oil supply,” Andy Lipow, president of Lipow Oil Associates, wrote in a memo Monday morning. “The oil market’s sharp reaction is rising due to concerns that the conflict could escalate and ultimately draw Iran into the conflict, impacting oil shipments through the Strait of Hormuz.”
Lipow points out that: Iranian involvement This will be key to determining the extent to which the conflict will affect oil prices. The Strait of Hormuz, located between Oman and Iran, produces between 17 and 18 million barrels of oil per day. If shut down, oil prices could rise by $20 to $30 a barrel, and U.S. gasoline prices could rise as well.
But for now, Lipow doesn’t think the conflict will affect the path of gas prices down.
Stock prices begin to fall due to the Middle East conflict
Shares were in the red shortly after the opening bell on Monday after a surprise attack on Israel by the Palestinian Islamic militant group Hamas raised concerns about broader geopolitical risks in the market.
The Dow Jones Industrial Average (^DJI) was down 0.1%, the S&P 500 (^GSPC) was down 0.4%, and the tech-heavy Nasdaq Composite Index (^IXIC) was down nearly 1%.
Chevron, Disney, Bristol-Myers Squibb: Stock price trends in pre-market trading
Below are some of the stocks leading Yahoo Finance’s trending ticker page in Monday’s pre-market trading.
Chevron Corporation (CVX): Chevron shares rose 3% as oil stocks rose amid renewed turmoil in the Middle East. The group has also been instructed by Israel’s Ministry of Energy to shut down the Tamar natural gas field off the country’s northern coast.
Disney (DIS): Disney stock rose more than 1%. Nelson Peltz’s Trian Fund Management has increased its stake in Disney, and the activist investor is expected to demand multiple board seats.
Bristol-Myers Squibb Company (BMY): Shares fell more than 1% premarket. The company announced that it will acquire cancer drug maker Mirati Therapeutics for up to $5.8 billion to diversify its cancer business.
Northrop Grumman Corporation (NOC): Shares rose 3% premarket on Monday. Defense stocks have begun to rise as the Middle East conflict intensifies.
Stock futures fall, crude oil prices soar
U.S. stocks could open in the red on Monday as investors weigh the potential impact of a surprise Palestinian attack on Israel launched over the weekend.
Dow Jones Industrial Average Futures (^DJI) fell 0.38% (125 points) and S&P 500 (^GSPC) fell 0.48%. The tech-heavy Nasdaq 100 contract fell 0.64%.
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