Oil prices continue to rise as Iran war uncertainty drags down stock markets – National
US stocks were volatile again on Monday as oil prices continued to rise amid uncertainty over when the war with Iran might end.
The S&P 500 fell 0.3% and deepened its losses following its worst week since the war with Iran. The Dow Jones Industrial Average was up 130 points, or 0.3%, as of 2:35 pm Eastern time, and the Nasdaq composite was down 0.6%.
Vigilance was rampant across the financial markets. After jumping to an early gain of 0.9%, the S&P 500 quickly erased nearly all of it before seeing the bottom. Stock indexes rose in Europe but fell sharply in other Asian markets, while the price of a barrel of US crude oil rose 3.3% to $102.88.
In Canada, the S&P/TSX composite index was up more than 300 points in morning trading but erased most of those gains in the afternoon, and was up 0.03% at 2:45 pm Eastern.
The mixed movement followed a storm of war over the weekend, including the entry into the fighting of the Houthi rebels in Yemen. The big issue for investors is whether oil and natural gas can resume their full flow from the Persian Gulf to customers around the world and prevent a brutal burst of inflation.
Shortly before the US stock market opened for trading on Monday, US President Donald Trump said on his social media platform that “great progress has been made” with “NEW, AND MORE CONFIDENTIAL, ending our military operations in Iran.”
But he also threatened the possibility of “blowing up and completely destroying” Iranian energy plants if a deal is not reached soon and if the Strait of Hormuz, a key waterway for oil flows, is not opened soon.
The statement fits and sums up the pattern of last week, when Trump would highlight the progress being made in the negotiations and give hope to the market, only to have doubts rise quickly afterwards about whether the war could end soon.
All the back and forth has some investors saying they are giving Trump’s announcements less weight than before. But stock prices are still cheaper than before the war, with some investors waiting for the right time to buy.
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The S&P 500 ended last week 8.7% below its all-time high, set in January. The Dow and Nasdaq were both more than 10% below their records, enough of a fall that professional investors are calling a “correction.”
Considering how much profit is expected to grow next year for companies in the S&P 500, the index looks 17% cheaper than before the war, on one estimate. That’s in the same range as where previous growth spurts in the market ended, as long as it didn’t trigger a recession or Federal Reserve interest rates, according to Morgan Stanley strategists.
That’s one of the signs strategists led by Michael Wilson point to as “growing evidence that the S&P 500’s correction is nearing its end.”
Of course, the Federal Reserve can get upset if it decides that oil prices threaten to stay high enough for long enough that it needs to raise interest rates. High interest rates can help keep inflation down, but it will also slow the economy and reduce the value of all types of investment.
Treasury yields have been jumping in the bond market since the start of the war on such concerns, but eased slightly on Monday.
The 10-year Treasury yield fell to 4.34% from 4.44% late Friday. That’s an important move for the bond market and gives Wall Street some breathing room. But it remains well above its pre-war level of 3.97%.
Lowering bond yields would help the real estate industry in particular. Not only do they lower borrowing costs, they can also make high-dividend-paying commercial stocks look more attractive compared to bonds. Alexandria Real Estate, which owns megacampuses for life sciences companies across the country, rose 0.7%.
Alcoa jumped 8.8% in one of the market’s biggest gains on speculation it could get more business after attacks that damaged rival aluminum facilities in the Middle East over the weekend.
Sysco fell 15% after it said it was buying Jetro Restaurant Depot for $21.6 billion and enough Sysco stock to value the company at about $29.1 billion.
In stock markets abroad, the FTSE 100 in London rose 1.6%, while the CAC 40 in Paris rose 0.9%. That followed a 3% drop in Seoul’s Kospi, 2.8% in Tokyo’s Nikkei 225 and 0.8% in Hong Kong’s Hang Seng.
AP Business Writers Yuri Kageyama and Matt Ott and AP reporter Ayaka McGill contributed to this report.
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