Markets look steadier after digesting Israeli strikes

Israel’s airstrikes on Iran Friday sent reverberations through financial markets.

Oil prices jumped on fears that supply from Iran, the world’s ninth-largest oil producer in 2023, would be disrupted.

Prices of gold, the stalwart shelter in times of crises, rose. Investors flock to the precious metal amid uncertainty because it serves as a stable store of value that is mostly resistant against exogenous shocks, such as inflation or geopolitical conflicts.

And the dollar strengthened, as it is wont to do when the world looks ugly. Recall the dollar smile: The greenback will appreciate when things are really good because investors want in on U.S. risk assets, or when they are really bad because investors want in on the perceived safety of U.S. government bonds.

The fact that the dollar increased in value against other currencies traditionally perceived as safe havens, such as the Swiss franc and Japanese yen, emphasizes the primacy of king dollar, despite rumblings of de-dollarization and concerns over U.S. government debt.

Stocks, the financial risk asset epitomized, fell across markets globally.

Despite the markets giving multiple indications we are entering a period of ugliness — or, at least, volatility — U.S. stocks still appear resilient, and the surge in oil prices only brings us back to where they were about three months ago as prices have been low since, CNBC’s Michael Santoli wrote.

In fact, U.S. futures ticked up on Monday, while the dollar index and gold prices dipped. In combination, those moves suggest investors are operating with a cooler head now after the initial panic.

The markets have, indeed, mostly shrugged off Russia’s invasion of Ukraine and the Israel-Hamas war, both of which are still brewing. If those scenarios are any indication, financial markets might find steady ground again.

Israel-Iran conflict enters fourth day
The conflict between Israel and Iran entered a fourth day as both countries began a new round of attacks on Monday, according to NBC News. Armed conflict broke out when Israel struck Iran’s nuclear facilities early Friday local time. In retaliation, Iran launched more than 100 drones toward Israeli territory. Those events are likely just the beginning in a rapid cycle of escalation, according to regional analysts.

Stocks rebound on Monday
U.S. futures rose Sunday night local time. On Friday, fears of a wider conflict in the Middle East sent stocks lower. The S&P 500 lost 1.13%, the Dow Jones Industrial Average fell 1.79% and the Nasdaq Composite retreated 1.3%. Asia-Pacific markets rose Monday. Japan’s Nikkei 225 and South Korea’s Kospi index were the top performers, with both rising more than 1%. In Australia, shares of energy company Santos surged as much as 15% after it received a non-binding takeover offer of $18.72 billion by an Abu Dhabi’s National Oil Company-led group.

Retail sales in China surges in May
China’s retail sales in May jumped 6.4% from a year earlier, data from National Bureau of Statistics showed Monday, accelerating from the 5.1% growth in the previous month. Analyst expectations were sharply lower at 5%, according to a Reuters poll. Linghui Fu, NBS spokesperson, attributed the improving consumption in May to the ongoing consumer goods trade-in program.

Demand for safe-haven assets abates
Prices of safe-haven assets pulled back on Monday after investors piled into them following Israel’s attack on Iran Friday. The dollar index, a measurement of the strength of the U.S. dollar against other major currencies, dipped 0.07% after rallying 0.3% on Friday. Likewise, spot gold slipped 0.1% and gold futures for August delivery retreated 0.25% Monday, chipping away at Friday’s gains of 1.4% and 1.5%, respectively.

Oil prices jump
Oil prices surged as investors feared a disruption to oil supply from Iran. As of Monday afternoon Singapore time, U.S. crude oil rose 1.23% to $73.88 a barrel, adding to its 7.26% jump on Friday. The global benchmark Brent climbed 0.94% to $74.96 a barrel, following Friday’s 7.02% surge. The CEOs of two major energy companies were hesitant to predict where oil prices could go.

Taiwan blacklists Huawei and SMIC
Taiwan’s trade authority added Huawei and SMIC, as well as a host of their subsidiaries, to its “Strategic High-Tech Commodities Entity List.” Taiwan’s current regulations require licenses from regulators before domestic firms can ship products to parties on the entity list. The move effectively puts Huawei and SMIC on a trade blacklist, further aligning Taiwan’s trade policy with that of the United States. 

[PRO] U.S. stocks still look resilient
Even though stocks fell on the eruption of conflict between Israel and Iran, the market appeared resilient, wrote CNBC’s Michael Santoli. This week, while hostilities between the two Middle East countries will continue weighing on investors’ minds, they should not lose sight of the Federal Reserve’s rate-setting meeting, which concludes Wednesday.