Surging Crude Oil Prices May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to give back ground after turning in a strong performance last week.

The downward momentum on Wall Street comes as the price of crude oil surges amid the continued exchange of attacks between the U.S. and Iran.

U.S. Central Command said it completed a new wave of offensive strikes against Iran on Sunday, hitting dozens of targets at multiple locations with precision munitions.

Tehran responded by attacking Gulf Arab states, including Bahrain, Kuwait, Qatar, Jordan and Oman, further straining the fragile ceasefire between the two countries.

U.S. crude oil futures are soaring by more than 4 percent amid conflicting statements from the U.S. and Iran about whether the Strait of Hormuz remains open amid the renewed attacks.

A steep drop by shares of SK Hynix (SKHY) is also likely to weigh on the tech sector, with U.S.-listed shares of the South Korean chipmaker plunging by more than 9 percent in pre-market trading after soaring by more than 13 percent during its debut last Friday.

However, traders may be reluctant to make more significant moves ahead of the release of earnings news from several financial giants as well as the release of key inflation data.

“Following stronger inflation readings earlier this year and a resilient labour market, investors are keen to determine whether underlying price pressures remain persistent despite the recent fall in energy prices,” said Daniela Hathorn, Senior Market Analyst at Capital.com.

“A hotter-than-expected reading would reinforce the higher-for-longer narrative and could add further support to the dollar and bond yields,” she added. “Conversely, a softer report would help offset some of the inflation concerns stemming from renewed geopolitical tensions and could provide equities with a much-needed boost.”

Stocks showed a lack of direction early in the session on Friday but moved mostly higher over the course of the trading day. The major averages all moved to the upside, although buying interest remained relatively subdued.

The major averages pulled back off their best levels going into the end of the day but still posted modest gains. The Dow rose 149.60 points or 0.3 percent to 52,637.01, the Nasdaq increased 74.72 points or 0.3 percent to 26,281.61 and the S&P 500 climbed 31.75 points or 0.4 percent to 7,575.39.

For the week, the tech-heavy Nasdaq surged by 1.7 percent, the S&P 500 jumped by 1.2 percent and the Dow advanced by 0.5 percent.

The upward move on Wall Street partly reflected strength among some big-name tech stocks, with shares of Meta Platforms (META) surging by 6 percent after Bank of America reiterated its Buy on the Facebook parent’s stock.

Shares of Nvidia (NVDA) also jumped by 4.0 percent, while U.S.-listed shares of SK Hynix soared by 13.1 percent as the South Korean chipmaker made its U.S. debut.

However, traders largely seemed reluctant to make more significant moves ahead of the unofficial start of earnings season.

Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM), Wells Fargo (WFC), Johnson & Johnson (JNJ), UnitedHealth (UNH) and Netflix (NFLX) are among the companies due to report their quarterly results.

“Investors will be looking for confirmation that AI-related investment continues to translate into robust earnings growth and resilient margins, particularly among the large technology companies that have driven much of this year’s rally,” said Daniela Hathorn, Senior Market Analyst at Capital.com.

She added, “With valuations still elevated, earnings guidance could prove just as important as the headline results themselves.”

A lack of major U.S. economic data may also have kept some traders on the sidelines ahead of the release of key inflation data.

The data could have a significant impact on the outlook for interest rates ahead of the Federal Reserve’s next monetary policy meeting later this month.

Despite the higher close by the broader markets, biotechnology stocks showed a substantial move to the downside, dragging the NYSE Arca Biotechnology Index down by 2.6 percent.

Considerable weakness was also visible among airline stocks, as reflected by the 2.2 percent slump by the NYSE Arca Airline Index.

On the other hand, housing stocks saw significant strength on the day, driving the Philadelphia Housing Sector Index up by 1.5 percent.

Oil service stocks also turned in a strong performance despite a decrease by the price of crude oil, with the Philadelphia Oil Service Index climbing by 1.4 percent.

Commodity, Currency Markets

Crude oil futures are spiking $2.63 to $74.04 a barrel after sliding $0.67 to $71.41 a barrel last Friday. Meanwhile, after falling $27.10 to $4,113.70 an ounce in the previous session, gold futures are slumping $45.50 to $4,068.20 an ounce.

On the currency front, the U.S. dollar is trading at 162.14 yen versus the 161.69 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1427 compared to last Friday’s $1.1413.

Asia

Asian markets fell on Monday amid renewed tensions in the Middle East and anxiety over the status of the Strait of Hormuz.

Inflation and interest-rate fears returned to the fore after the U.S. launched fresh strikes against Iran and Tehran responded by attacking Gulf Arab states, including Bahrain, Kuwait, Qatar, Jordan and Oman, further straining a fragile ceasefire between the two countries.

Iran announced the closure of the waterway “until further notice” – a claim U.S. military and maritime authorities rejected.

The dollar rose against most of its peers, while gold prices traded down more than 1 percent at $4,057 an ounce ahead of key U.S. inflation data and Federal Reserve Chair Kevin Warsh’s first congressional testimony due this week.

Brent crude futures jumped nearly 4 percent toward $79 a barrel on concerns over potential supply disruptions.

China’s Shanghai Composite Index plunged 2.1 percent to 3,913.79 as investors braced for key economic data releases from the U.S. and China. Hong Kong’s Hang Seng Index finished 0.2 percent higher at 24,213.72 after a choppy session.

Japanese markets tumbled as rising oil prices clouded the outlook for corporate earnings growth. The Nikkei 225 Index slumped 1.9 percent to 67,242.73, with chip-related stocks leading losses. The broader Topix Index settled 0.7 percent lower at 4,007.49.

Kioxia Holdings lost 12.9 percent, Advantest fell 3.4 percent and Tokyo Electron declined 2.3 percent. Robot maker Yaskawa Electric plunged 14.3 percent after posting disappointing first-quarter results.

Seoul stocks nosedived amid intensifying geopolitical tensions in the Middle East and ahead of the Bank of Korea’s policy decision due on Thursday, with the central bank widely expected to lift its base rate to 2.75 percent.

The Kospi Index plummeted 9 percent to 6,806.93, with tech stocks pacing the decliners. Market bellwether Samsung Electronics plunged 10.7 percent while SK Hynix gave up 15.4 percent after making history with the largest-ever U.S. listing by a foreign company.

Australian markets ended on a flat note as rising oil prices reinforced expectations of higher interest rates. While gold, mining and technology stocks lost ground, gains in banks and energy stocks helped markets recover early losses.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dropped 0.5 percent to 13,723.20 as investors returned from the long Matariki weekend.

Europe

European stocks are turning in a mixed performance on Monday as investors shrug off escalating geopolitical tensions and shift focus to the earnings season, with major U.S. banks, including Goldman Sachs and JPMorgan Chase, scheduled to announce their quarterly results on Tuesday.

Brent crude prices have moved sharply higher as the U.S. and Iran continued to exchange missile strikes, raising fresh uncertainty over oil supplies and regional stability.

While the U.K.’s FTSED 100 Index is down by 0.2 percent, the French CAC 40 Index is just above the unchanged line and the German DAX Index is up by 0.1 percent.

French automaker Renault has edged up slightly after the High Court of Justice in England & Wales rejected all diesel emissions claims against the company.

Jeep and Fiat owner Stellantis was moving lower despite reporting a 10 percent increase in Q2 vehicle sales.

AkzoNobel has advanced after rejecting an offer from Japan’s Nippon Paint to acquire its decorative paints business.

German healthcare group Fresenius has fallen more than 1 percent after reaffirming its annual adjusted earnings growth guidance.

PageGroup has soared almost 10 percent. The British recruiter posted second-quarter gross profit above market expectations.

Grafton Group, the owner of Woodie’s, has jumped after reporting first-half trading growth and maintaining full-year adjusted operating profit guidance.

Developer Derwent London has risen after signing a £100 million unsecured revolving credit facility with Handelsbanken Plc.

U.S. Economic News

Federal Reserve Governor Christopher Waller is scheduled to speak on the economic outlook in a conversation before the New York Association for Business Economics at 12:30 pm ET.