US Stocks Hit as War Escalates – Dow down 1.1%
Global financial markets remained firmly in risk-off mode overnight as the conflict between the United States and Iran intensified further, driving another sharp rally in oil prices while weighing on broader investor sentiment. President Trump added to market concerns after declaring the interim peace agreement was effectively over, increasing fears the conflict could broaden and potentially disrupt global energy supplies again.
US equity markets struggled under the weight of the escalating geopolitical tensions. The Dow Jones fell 1.09% to close at 52,348, while the S&P 500 eased 0.28% to 7,482. Technology stocks once again demonstrated relative resilience, with the Nasdaq managing to edge 0.20% higher to finish at 25,870, supported by continued strength across the AI sector.
Energy markets were once again the standout performers, with Brent crude surging 6.86% to $79.25 per barrel and WTI climbing 6.08% to $74.70. The gains come on top of Tuesday’s rally of more than 5%, highlighting growing concerns over the security of shipping through the Strait of Hormuz.
In currency markets, the US Dollar Index edged 0.04% higher to 101.07 as investors continued to favour the greenback amid heightened geopolitical uncertainty. US Treasury yields also moved higher, with the 2-year yield rising 3.3 basis points to 4.218%, while the benchmark 10-year Treasury yield gained 2.8 basis points to 4.579% as markets assessed the inflationary implications of higher energy prices.
Despite the deteriorating geopolitical backdrop, gold eased 0.70% to $4,077.43 an ounce as rising Treasury yields reduced the appeal of the non-yielding precious metal, offsetting its traditional safe-haven demand.
Gold Again Looking Vulnerable if War Escalates
Gold fell in trading yesterday as, once again, it traded in line with potential inflationary pressures brought about from higher oil prices rather than its traditional safe-haven status. This has been a particular feature of financial markets trading over the last few months, and Gold’s move over the last few days, where it has dropped over 4% from multi-week highs, is indicative that we will see more downside momentum if, as looks likely, hostilities increase further between the US and Iran. It found a base overnight just above the $4,000 level, but another round of strikes could see it look to challenge support levels, which now come in under that level, with the long-term trendline now around $3,969.50 and the annual low just south of that at $3,942.99. Strong breaks there, which could be likely with an escalation to full engagement, could see a swift move down to longer-term support just above the $3,600 area.
Geopolitics to Dominate Sessions Ahead
Looking ahead to today’s trading sessions, geopolitical developments are once again expected to dominate market sentiment, with traders likely to react swiftly to any further headlines from the Middle East. The economic calendar remains relatively light, with the release of the ECB Monetary Policy Meeting Accounts during the European session and US Weekly Unemployment Claims (exp. 218k) later tonight the key scheduled events. However, unless there is a significant surprise from either release, markets are likely to remain primarily driven by geopolitical developments, with volatility expected to stay elevated throughout the European and US trading sessions.
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