The dollar and oil gave back early gains as traders awaited Tehran’s response to Washington’s weekend strike on Iranian nuclear facilities.
The Bloomberg Dollar Index rose 0.3%, while the global benchmark Brent crude oil price soared by 5.7% at one point and later climbed nearly 2%. S&P 500 futures dropped 0.3%, and Asian stock indices fell to their lowest level since early June. U.S. Treasury yields edged higher.
Oil remains the main concern, as any disruption to traffic through the Strait of Hormuz, a major global channel for crude oil and natural gas transportation, could trigger fears of a sharp rise in energy prices. Although Iranian Foreign Minister Abbas Araqchi said that Iran reserves all options, there are currently no signs of any actual disruption to physical oil shipments.
This uncertainty is rapidly becoming the new normal in the market, so I expect the market to remain relatively calm, unless tensions continue to escalate – clearly, there is a possibility of that, said market analyst Josh Gilbert. “Even if there is no immediate impact, the combination of oil price volatility and a new round of uncertainty may be enough to dampen risk appetite.”
Since Israel launched its first attack this month, market reactions have generally been lackluster. Even though the S&P 500 has declined over the past two weeks, it is still only about 3% below the record high it reached in February. The US dollar has risen by more than 1% since hitting a three-year low earlier this month.
Some market observers believe that whether this situation can persist largely depends on Iran’s next move.
Ben Zarate, a senior lecturer in international relations at Monash University in Melbourne, said, “Iran is very likely to retaliate against the United States in some way.” “In this regard, the market will be very sensitive to military events in the region – including stocks, bonds and currencies – because we simply don’t know how things will ultimately develop.”
Goldman Sachs Group said that if the oil flow through the Strait of Hormuz drops by half within a month and then continues to decline by 10% over the next 11 months, the price of Brent crude oil will briefly soar to $110 per barrel.
Nakamura Okumura, a senior interest rate strategist at SMBC Nikko Securities, wrote in a report: “If retaliatory measures continue, the increase in US fiscal spending could lead to a rise in US Treasury yields and US stock prices.” During the Iraq War in 2003 and the Gulf War in 1991, “as the stimulative effect of large-scale war spending emerged or was expected to emerge, the US stock market rose.”
The downside space may be limited as some market participants have been preparing for a worsening of the conflict. Since Israel’s attack on Iran on June 13th, the MSCI All Country World Index has fallen by 1.5%. Fund managers have reduced their holdings of stocks, and stock prices are no longer overbought. The demand for hedging has increased, which means that the possibility of a deep sell-off at the current level is relatively small.
Technical analysis:
Gold: Our intraday strategy combination of yellow and blue remains unchanged. The United States has officially intervened in launching military actions against Iran, which will further intensify the severity of geopolitical conflicts. Although there is still a possibility of mediation by third-party countries, the room for compromise between the US and Israel and Iran is actually very limited. Therefore, we currently maintain the attempt to break through the momentum and also ensure the attempt to buy after the lower sweep liquidity. For detailed positions, please consult the plugin.
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Nasdaq: Last Friday, the yellow upward sweep of liquidity space was perfectly realized for profit. Today, we will continue to arrange the combination strategy of yellow and blue. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg and note “666” in the message.
Crude oil: The long position we took after the yellow down-sweep liquidity alert last Friday performed perfectly. For today, we will continue to maintain the blue + yellow combination configuration. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and write “666” in the message.
Today’s key financial data and events to focus on:
At 15:00, Fed Governor Waller delivered the opening remarks at an event.
15:30 Germany’s Markit/BME Manufacturing Purchasing Managers’ Index (PMI) Flash for June
16:00 Eurozone June Markit Manufacturing Purchasing Managers’ Index (PMI) Preliminary Value
16:30 UK June Markit/CIPS Manufacturing Purchasing Managers’ Index
21:45 US June Markit Services PMI Preliminary
At 22:00, Federal Reserve Governor Bowman of the United States will deliver a speech on monetary policy and the banking industry.
