Volatility to Spike After US Bombing – Stocks Under Pressure
Traders are expecting to see volatility spike in trading today after the US bombed Iranian nuclear facilities over the weekend. Markets had been relatively quiet on Friday, with the major indices in the US muted — the Dow added 0.08%, the S&P fell 0.22%, and the Nasdaq lost 0.51%. However, they are expected to come under pressure on the open later today. The dollar (DXY) added just 0.04% to move up to 98.70, while Treasury yields fell — the 2-year down 3.4 basis points to 3.908%, and the 10-year off 1.6 basis points to 4.375%. Oil prices were mixed on Friday, Brent down 2.33% to $77.01, while WTI added 0.46% to $73.84, although we have already seen a big spike this morning on the Asian open. Gold dipped in trading on Friday, ultimately closing down just 0.07% at $3,367.98, but has also spiked on the open this morning, trading up to $3,388 on the initial run.
Stakes Raised in Middle East – Where Do Markets Go from Here
Traders are anticipating big moves across risk assets in the sessions and days ahead. However, the size and indeed the direction of the moves will largely depend on actions from either side in the coming hours. Iran has promised retaliation for the US strikes and has said that “all options” are open to it, while President Trump has warned that more attacks from US forces could come if Iran does not make peace with Israel. Any escalation in the conflict from here — which would presumably involve a strike on US targets from Iran — would see oil, gold, and haven currencies surge, while stocks and risk assets are hit. Any signs of a move towards the negotiating table would see moves corrected. Experienced market players are expecting that we see both eventualities over the coming days, with many positioning for an escalation before compromise. However, time will tell at this stage, and any significant updates will see them jump on opportunities swiftly. It could be a busy week ahead of us this week.
Middle East Conflict Dominates Markets Today
The escalating conflict in the Middle East is set to dominate market sentiment today as investors price in the United States’ entry and any fresh updates that hit the newswires. There are some key data updates that will influence local markets. There is a raft of Flash Services and Manufacturing PMI numbers across the globe — including Australia, France, Germany, the EU, the UK, and the US — which investors will be monitoring closely. Existing Home Sales numbers are due out in the US, and we are also set to hear from a plethora of central bankers over the course of the day, including the Fed’s Waller, Bowman, Goolsbee, Kugler, and Williams, and the Buba’s Nagel.
