Crude Oil Volatility May Lead To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to see further downside after recovering from their worst levels but still ending the previous session modestly lower.

The downward momentum on Wall Street comes amid considerable volatility by the price of crude oil, which has been a key driver of trading in recent sessions.

Brent crude oil futures jumped above $111 a barrel earlier in the day but have pulled back sharply and are currently tumbling by nearly 2 percent.

The volatility in the oil markets comes as traders keep a close eye on developments in the Middle East war and the impact on energy supplies.

Crude oil prices initially surged amid news of new attacks on energy infrastructure in the region but gave back ground amid reports suggesting the U.S. is weighing lifting sanctions on some Iranian oil to increase supply and bring down prices.

The rollercoaster extends the volatility seen in the previous session, when oil prices soared to nearly $120 a barrel before pulling back sharply after Israeli Prime Minister Benjamin Netanyahu told reporters Israel would be helping the U.S. reopen the Strait of Hormuz.

However, the volatility shown by crude oil may lead some traders to refrain from making significant moves, with a lack of major U.S. economic data also likely to keep some traders on the sidelines.

After seeing notable weakness throughout much of the session, stocks regained some ground in the latter part of the trading day on Thursday. The major averages climbed well off their worst levels of the day but remained in negative territory.

The Nasdaq ended the day down 61.73 points or 0.3 percent at 22,090.69 but had slumped by as much as 1.4 percent to a six-month intraday low. The S&P 500 also fell 18.21 points or 0.3 percent to 6,606.49, while the Dow slid 203.72 points or 0.4 percent to 46,021.43.

Despite the late-day recovery attempt, the major averages still ended the day at their lowest closing levels in four months.

The early weakness on Wall Street came amid concerns about the escalation of the war in the Middle East following attacks on critical energy infrastructure across the region.

Israel bombed Iran’s South Pars natural gas fields and oil facilities in Asaluyeh, while an Iranian missile attack on Qatar’s Ras Laffan energy complex caused “extensive damage,” according to the country’s state-run energy firm.

President Donald Trump threatened in a post on Truth Social to “massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before” if there are further attacks on Qatar.

However, after soaring to nearly $120 a barrel following the latest attacks, Brent crude oil futures have pulled back sharply, contributing to the recovery attempt by stocks.

Oil futures came under pressure after Israeli Prime Minister Benjamin Netanyahu told reporters Israel would be helping the U.S. reopen the Strait of Hormuz.

In U.S. economic news, the Labor Department released a report showing an unexpected dip in first-time claims for U.S. unemployment benefits in the week ended March 14th.

The report said initial jobless claims fell to 205,000, a decrease of 8,000 from the previous week’s unrevised level of 213,000. Economists had expected jobless claims to inch up to 215,000.

The Labor Department said the less volatile four-week moving average also edged down to 210,750, a decrease of 750 from the previous week’s revised average of 211,500.

Despite the pullback by the price of crude oil, oil service stocks continued to turn in a strong performance, driving the Philadelphia Oil Service Index up by 2.1 percent.

Natural gas stocks also saw considerable strength, with the NYSE Arca Natural Gas Index jumping by 2.1 percent, as the commodity has given back ground after an early surge but remains sharply higher.

Networking and computer hardware stocks also moved notably higher, while gold stocks plunged along with the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 6.1 percent.

Commodity, Currency Markets

Crude oil futures are tumbling $1.32 to $94.82 a barrel after slipping $0.18 to $96.14 a barrel on Thursday. Meanwhile, after plummeting $290.50 to $4,605.70 ounce in the previous session, gold futures are jumping $77.20 to $4,682.90 an ounce.

On the currency front, the U.S. dollar is trading at 158.61 yen versus the 157.72 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1571 compared to yesterday’s $1.1588.

Asia

Asian stocks ended mostly lower in thin trading on Friday, with Japanese markets closed for a holiday. A cautious undertone prevailed as strikes targeting infrastructure in Iran, Qatar and Saudi Arabia stoked concerns of a prolonged economic impact from the war.

Regional losses, however, remained capped after Israel said it will no longer target energy infrastructure.

Seven U.S. allies have offered support for a potential coalition to reopen the strait of Hormuz for commercial ships and oil tankers.

Also, media reports suggested that the U.S. is weighing lifting sanctions on some Iranian oil to increase supply and bring down prices.

U.S. President Donald Trump told reporters he’s “not putting troops anywhere” after being asked about the possibility of sending more service members to the region.

The dollar slipped in Asian trading and faced a weekly loss as bonds remained under pressure.

Oil prices were subdued on easing supply concerns, while gold traded up nearly 1 percent after falling for a seventh session to their lowest level in two months in the previous session.

China’s Shanghai Composite Index tumbled 1.2 percent to 3,957.05 as the People’s Bank of China left benchmark lending loan prime rates unchanged for the 10th consecutive month, in line with market expectations.

Hong Kong’s Hang Seng Index fell 0.9 percent to 25,277.32 on concerns that a prolonged West Asia conflict will keep inflation higher for longer and weigh on global growth.

Major technology names weakened, with Alibaba tumbling 6.3 percent following its earnings announcement.

Seoul stocks eked out modest gains as oil prices stabilized after the latest remarks by U.S. and Israeli officials. The Kospi Index edged up by 0.3 percent to 5,781.20.

Power plant manufacturer Doosan Enerbility surged 3.1 percent, trading firm Samsung C&T advanced 2.2 percent and battery maker LG Energy Solution added 1.2 percent.

Australian markets fell notably as yields on government bonds climbed amid bets on higher interest rates.

The benchmark S&P/ASX 200 Index slid 0.8 percent to 8,428.40, with banks, resource and consumer discretionary stocks leading losses. The broader All Ordinaries Index settled 0.7 percent lower at 8,628.30.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dropped 0.5 percent to 12,989.99, extending losses from the previous session and notching its lowest level since early September.

Europe

European stocks are seeing modest strength on Friday as oil prices moderated in response to the efforts by the U.S. and Israel to ease concerns about ongoing supply issues.

Israeli Prime Minister Benjamin Netanyahu said U.S. President Donald Trump had requested that there be no further attacks on the Iranian gas field.

Trump also suggested that he has no plans to deploy American troops to the Middle East. To increase oil supply and bring down energy prices, U.S. officials said Washington may soon lift sanctions on Iranian oil stranded in tankers.

In economic news, the U.K. budget deficit reached the second highest level on record for the month of February, the Office for National Statistics reported.

Public sector net borrowing rose by GBP 2.2 billion to GBP 14.3 billion in February, surpassing the expected level of GBP 8.7 billion.

Elsewhere, German producer prices logged an annual decrease of 3.3 percent in February, slower than the 3.0 percent drop seen in January largely due to a sharp decline in energy prices, Destatis said.

The German DAX Index, the U.K.’s FTSE 100 Index and the French CAC 40 Index are all up by 0.2 percent.

Swiss pharma major Novartis has moved to the upside after it agreed to buy an experimental breast cancer drug from Synnovation Therapeutics for as much as $3 billion.

Swedish Construction group Skanska has also jumped on bagging a $165 million contract in the Unted States.

Stellantis has also advanced. Its battery-electric vehicles in North America now have access to the Tesla Supercharger network via adapters.

Meanwhile, engineering group Smiths Group has tumbled after its half-year revenue growth fell short of estimates.

British pub chain JD Wetherspoon has also moved sharply lower after reporting a notable drop in profits in the first half.

U.S. Economic News

No major U.S. economic data is scheduled to be released today.