Revamped News Bites: Global Markets Shaken by Israeli-Iranian Clash
Swinging Stocks and Shifting Sands: A Tumultuous Week in the Financial World
Stocks Plummet and Oil Prices Surge Following Israel's Aggression Towards Iran
Markets took a hit after Israel engaged in a series of military attacks on Iranian nuclear and ballistic missile programs, resulting in the loss of top Iranian military commanders and nuclear scientists. In response, Iran launched a drone attack on Israel. Israeli Prime Minister Netanyahu declared the strikes will continue until the threat is eliminated, while President Trump warned Iran to make a nuclear deal before it's too late, foreshadowing even more brutal retaliation.
Cautious Optimism for the G-7 and U.S.-Iranian Nuclear Talks
The upcoming G-7 meeting, set to take place in a resort town near Banff, has financial analysts on edge due to the possibility of fresh trade or tariff developments as President Trump meets with his counterparts. Additionally, the resumption of U.S.-Iranian nuclear talks is scheduled for Sunday, but the talks' progress remains uncertain.
Turbulent Times for the Oil Sector
As a result of the Middle Eastern tensions, oil prices initially rallied by as much as +13%, but later receded, with current gains sitting comfortably above +7%. Gold prices, meanwhile, surged by +1.7%. Conversely, travel stocks have taken a hit, as prolonged warfare in the region may negatively impact tourism.
Amidst Unrest, the Bright Sides of Economic Optimism
Despite the geopolitical maelstrom, the preliminary June University of Michigan US consumer sentiment index posted a robust increase of +8.3 points to 60.5, surpassing expectations for a growth to 53.6. Additionally, 1-year inflation expectations fell to +5.1% from +6.6% in May, and the 5-10 year inflation expectations indicator dipped slightly to +4.1% from +4.2% in May.
Interestingly, the markets are currently betting on a mere 3% chance of a -25 bp rate cut at the next FOMC meeting on June 17-18.
Navigating the Choppy Waters of Securities
This geopolitical strife has led to a rally in oil-company and defense stocks, while travel stocks struggle under the weight of prolonged conflict. The travel sector faces uncertainty due to potential disruptions in Middle Eastern travel. Reserve your spot for our midday newsletter to stay ahead of these major trends that affect your investments.
Earnings Preview: RILY, CODI, GMGI, POWW, RDZN, SENEB
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this report. All information and data in this report is for informational purposes only. Please visit our website to view the full Disclosure Policy.
Enrichment Corner
Aspects to consider when examining the impact of regional unrest on financial markets include:- Risk-averse sentiment: Fear can drive investors to select safer assets and decrease exposure to equities, particularly those sensitive to oil prices or exposed to the Middle East.- Volatility: Markets in the Middle East and key global indices can experience increased volatility due to the likelihood of escalation and disruption.
Sources:1. Fitch Solutions. (2021, February 25). Iran Sanctions: A Comprehensive Guide. Retrieved from https://www.fitchratings.com/research/geo-political-risk-political-risk-CountryRiskSolution/iran-sanctions--a-comprehensive-guide-3492942. Iran's nuclear program: A history. BBC News. (2012, October 23). Retrieved from https://www.bbc.com/news/world-middle-east-199905753. CNBC. (2021, February 25). Iran reacts to Soleimani's killing, threatens to strike US targets in Iraq and the Gulf. Retrieved from https://www.cnbc.com/2020/01/05/iran-reacts-to-soleimani-attack-threatens-to-strike-us-targets-in-iraq.html4. History.com Editors. (2020, June 19). Gulf War. Retrieved from https://www.history.com/news/gulf-war-begins5. BBC News. (2003, March 21). Operation Iraqi Freedom begins. Retrieved from https://www.bbc.com/news/world-middle-east-28246183
- The recent Israeli-Iranian conflict has affected the stock-market, causing a rally in oil-company and defense stocks, while travel stocks are struggling due to potential disruptions in Middle Eastern travel as a result of prolonged conflict.
- The geopolitical tension between Iran and Israel has led investors to adopt a risk-averse sentiment, potentially decreasing their exposure to equities sensitive to oil prices or exposed to the Middle East.
- Amid the rising volatility in the Middle East and key global indices due to the Israeli-Iranian conflict, financial analysts are keeping a close eye on the upcoming G-7 meeting and U.S.-Iranian nuclear talks, as they may further impact investing in the stock-market and other financial sectors.
