US stocks tumbled on Monday while oil prices surged after military strikes by the US and Israel on Iran were followed by counterattacks, sending shockwaves through global markets.
The Dow Jones Industrial Average (^DJI) slumped 1.1%, or just over 500 points. Meanwhile, the S&P 500 (^GSPC) sank roughly 1%, while the tech-heavy Nasdaq Composite (^IXIC) dived roughly 1.1% as the escalating Middle East conflict spurred a retreat from risk assets.
The impact on oil prices, and in turn on inflation, is front of mind for investors already uneasy about the backdrop for stocks. The S&P 500 (^GSPC) closed February in negative territory after renewed volatility in AI and software names rattled markets.
Oil prices jumped Monday, with Brent crude futures (BZ=F) surging as much as 13% to top $82 a barrel but moderating gains to slip below $80 at last check. West Texas Intermediate futures (CL=F) traded just below $73, up around 8%. While Iran is OPEC’s fourth-largest producer, markets are also bracing for sustained disruption in the key Strait of Hormuz, where tanker traffic is at a standstill.
Shares in energy major Exxon (XOM) popped, while defense stocks including Lockheed Martin (LMT) also found buyers. But travel-linked stocks slipped, with Delta Air Lines (DAL) dropping in the fallout.
Elsewhere in markets, gold (GC=F) jumped to tap $5,400 an ounce even as the dollar (DX-Y.NYB) rose. JPMorgan said it expects a “risk premium” gain of up to 10% for the precious metal. Meanwhile, Treasury yields (^TNX) moved higher as markets cut back bets on interest-rate cuts on the prospect of hotter inflation.
The next key input into those rate calculations comes Friday, with the release of the monthly jobs report. Economists expect US payrolls to have added 60,000 jobs in February, down from January’s stronger-than-expected 130,000 gain that eased recession fears.
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European natural gas prices soar as Iran conflict tightens gas flows
Natural gas prices on the European energy market (TTF=F) have soared, gaining more than 45% through Monday trading before slightly paring gains as investors assess the conflict in Iran and the news that QatarEnergy is halting production of liquified natural gas (LNG).
Oil (CL=F, BZ=F) is the headline commodity risk for conflict in the Middle East and disruptions to tanker movement through the Strait of Hormuz, a critical global shipping chokepoint that runs between the coasts of Iran and Oman. But the corridor is also key for the gas market, as roughly 20% of global LNG supply crosses its waters every day.
Tanker traffic through the Strait has essentially halted since the US and Israel began striking Iran early Saturday morning, already tightening. Iran’s Revolutionary Guard Corps have instructed ships not to pass through the corridor, at least three tankers have been attacked, and major insurers have begun denying “war risk” insurance.
The pause in Qatar, alongside the stoppage of traffic of already-loaded LNG through the Strait, has put immense pressure on the European market.
Defense and energy names are leading stocks early
The first 90 minutes of trading is showing some clear patterns — some expected, some not.
Defense and energy names are topping the S&P 500 (^GSPC), with Palantir (PLTR) and its deep connections to the US government at the top — up 6%. Axon (AXON), Northrop Grumman (NOC), RTX (RTX), and L3Harris (LHX) are also leaders (up 2%-4%).
In energy, Marathon Petro (MPC), APA (APA), Defon (DVN), Valero (VLO) and ConocoPhillips (COP) are all up 3-4%.
Interestingly, bitcoin is rallying in the face of dollar strength, catapulting Strategy (MSTR) to the top of the Nasdaq 100 Index (^NDX) — up 7%. And in the S&P 500, Coinbase (COIN) is the #3 gainer — up 4%.
S&P 500 testing key technical support after stocks open weak
Large-cap energy (XLE) opened with a 3.5% gain, which has faded to 1% in the opening minutes.
To the downside, consumer discretionary (XLY), materials (XLB), financials (XLF), and communication services (XLC) are all off 1% or more.
Meanwhile, the S&P 500 index (^GSPC) itself opened with a 1% loss right around the big 6,800 level — but it’s now rebounded. This is the fourth test of 6,800 this year and is one to watch into the close.
The sideways trading ranges in the S&P and the Nasdaq (^IXIC) have been frustrating the bulls and the bears since late last year.
US stocks tumble at the open as Iran attacks spiral
The major US stock indexes careened into the red at the opening bell on Monday as investors fled to safe-haven assets. The tumble comes as the US-Iran conflict continues to broaden out, engulfing an increasingly large part of the Middle East.
The Dow Jones Industrial Average (^DJI) fell by 1.1%, or just over 500 points. Meanwhile, the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) sank 0.9% and 0.8%, respectively.
Oil prices surged on Monday, as Brent crude (BZ=F) jumped by as much as 13% to top $82 a barrel before slightly paring back gains. West Texas Intermediate futures (CL=F) changed hands just below $73, up around 8%. While Iran is OPEC’s fourth-largest producer, markets are also bracing for sustained disruption in the key Strait of Hormuz, where tanker traffic is at a standstill.
In Europe, gas futures (TTF=F) — heavily exposed to disruption to gas flows through the Strait of Hormuz — exploded higher by more than 45%.
Crude oil, gold, dollar jump as stocks set to open red
The dollar (DX-Y.NYB) and gold futures (GC=F) are both bid as we await the opening bell for stocks — a reminder that cash and bullion can rally together when investors scramble for safe havens.
Besides gold (and silver to a limited extent), crude oil is also surging. WTI (CL=F) is ripping on obvious supply-risk fears tied to geopolitics, and it’s dragging energy stocks higher even as most sectors are set to open in the red.
The twist: long-term US Treasurys yields (^TNX, ^TYX) are spiking as bonds are getting dumped, not bought. That’s as investors demand extra yield for longer-term risk (what’s called the term premium) — plus systematic strategies dialing down longer-term (duration) exposure as volatility rises.
Geopolitical shocks often fade fast in markets, but some linger. Watch the Cboe Volatility Index (^VIX) above 20 as a gauge of institutional hedging demand (read: skittishness).
Nvidia invests $4 billion in Coherent, Lumentum to advance next-gen AI data centers
Nvidia (NVDA) said it struck two strategic partnerships with photonics companies Coherent (COHR) and Lumentum (LITE) on Monday in an effort to develop and secure access to state-of-the-art optics technology for the next generation of AI data centers.
Nvidia stock fell 1.2% in premarket trading following the announcement, while Coherent shares jumped around 8% and Lumentum stock also surged over 7%.
Nvidia agreed to invest $2 billion in Coherent to support the company’s future operations as it expands its US manufacturing capabilities. As part of the agreement, Nvidia made a multibillion-dollar purchase commitment and received rights to access advanced laser and optical networking products in the future.
The Santa Clara-based company also announced a similar partnership with Lumentum, also investing $2 billion to support research & development and a new fab based in the US.
Nvidia has been rapidly scaling up its networking business and is betting that the relatively smaller photonics industry can help it make large-scale AI networks more energy efficient, reducing a bottleneck on artificial intelligence growth.
“Computing has fundamentally changed,” Nvidia CEO Jensen Huang said in a statement. “In the age of AI, software runs on intelligence with tokens generated in real time by AI factories for every interaction and every context. With Coherent, NVIDIA is pioneering next-generation silicon photonics to enable AI infrastructure at unprecedented scale, speed and energy efficiency.”
Morgan Stanley’s Wilson says Iran unlikely to dent bullish view
Premarket trending tickers: Norwegian Cruise Line, Berkshire, and American Airlines
Norwegian Cruise Line Holdings Ltd. (NCLH) stock fell 7% before the bell on Monday. The cruise line released its fourth quarter earnings, and despite beating analyst estimates, the group’s stock fell as investors worried about the rise of oil prices driving up fuel costs. Royal Caribbean (RCL) shares also fell 5% during premarket hours today.
Berkshire Hathaway’s (BRK-B) stock fell 1% during premarket hours following the release of its fourth quarter earnings on Saturday. Berkshire’s operating profit after taxes fell 30% from a year ago.
American Airlines’ (AAL) stock fell 5% before the bell on Monday, as the rise in oil prices caused worry among investors that fuel costs would increase.
Gold surges above $5,400 as demand for safe-haven asset jumps amid Iran conflict
Gold futures (GC=F) rose on Monday, trading above $5,400 per ounce as the ongoing conflict in the Middle East caused investors to move toward safe-haven assets.
Treasurys retreat as inflation concern eclipses haven buying
The 10-year Treasury yield is rising alongside those for US bonds more broadly, even as the spiraling US-Iran conflict sparks a risk-off mood in markets.
Tesla gains market share in France, Norway in February
Tesla (TSLA) gained market share again in France and Norway in February, according to official data, in a sign of stabilization in Europe after two years of declining sales. Tesla stock fell 2% before the bell on Monday.
Defense stocks jump, airlines slide as Iran attack jolts markets
Airline, hotel, and defense stocks began to react to the Iran conflict on Monday during premarket hours. Lockheed Martin (LMT) shares rose 7% before the bell on Monday, alongside RTX (RTX). BAE Systems’ (BA.L) London shares were up 5%.
Energy companies also saw their stocks jump, with New Fortress Energy (NFE) shares rising 15% in premarket trading. Oil major Equinor ASA (EQNR) rose 4%.
Gold (GC=F) prices catching a strong bid this morning to over $5,400 an ounce.
Helpful chart from JPMorgan showing how gold prices have reacted around prior Middle East conflicts:
JPMorgan weighs in on upside risk to oil prices
The JPMorgan team sees upside potential for oil (CL=F, BZ=F) prices to $120 a barrel if the war spreads throughout the Middle East:
Early Yahoo Finance trending tickers following US attacks on Iran
No surprise here, some of the most visited ticker pages on Yahoo Finance this morning include Exxon Mobil (XOM), Lockheed Martin (LMT), Chevron (CVX) and Occidental Petroleum (OXY).
Some helpful charts from EvercoreISI on the exposures for the oil majors.
Where Goldman sees oil prices headed
Oil (CL=F, BZ=F) prices have surged this morning post the launch of the US attacks on Iran.
Goldman thinks a good deal of upside may be left for prices:
Goldman Sachs on the markets amid Operation Epic Fury
How Goldman is thinking about the markets in the wake of the US attacks against Iran:
Trump pushes for Iran leadership change as Tehran stays defiant
President Trump said on Sunday that the bombing against Iran will continue for several weeks and called for Tehran’s leaders to surrender. But Iran’s security chief said it has no intention of negotiating with the US.
Blasts continued across Bahrain, Kuwait, the United Arab Emirates, and Qatar, as the Gulf states intercepted missiles launched by Iran in retaliation for the US-Israeli strikes, showing the war is spreading beyond Iran’s borders. The conflict has entered its third day since US-Israeli forces began airstrikes against Iran over the weekend.
Trump is calling on Iran’s leaders to hand power to the nation’s people, and The Atlantic said Trump has agreed to speak with Iran’s new leadership.
