Stan Choe
The US stock market is holding steadier as Wall Street waits for the next signal on when the war with Iran may end.
The S&P 500 added 0.4 per cent, a day after its latest wild swings caused by extreme moves in the oil market. The Dow Jones Industrial Average was up 313 points, or 0.7 per cent, and the Nasdaq composite was 0.6 per cent higher.
The Australian sharemarket is set to rise, with futures at 4.59am AEDT pointing to a rise of 79 points, or 0.9 per cent, at the open. The ASX added 1.1 per cent on Tuesday but is still sharply lower this week after Monday’s 2.9 per cent tumble. The Australian dollar was trading at US71.17¢ at 5,12am AEDT.
Oil prices, meanwhile, continued to fall further below where they were late on Monday. Spikes there have been rocking financial markets worldwide because of worries that the war could block the global flow of oil and natural gas for a long time.
The price for a barrel of Brent crude, the international standard, was sitting at $US82.90. That’s down 16.2 per cent from its settlement price the day before, though much of that decline happened before the US stock market finished trading on Monday. That’s why the drop did not give much of a boost to US stocks. A barrel of benchmark US crude was also shifting lower from where it was late Monday, at $US80.34.
Oil prices plunged Monday afternoon from a high of nearly $US120 per barrel, its most expensive level since 2022, after President Donald Trump told CBS News he thinks “the war is very complete, pretty much.” That raised hopes that the war may end sooner than later, which could allow oil to flow freely again from the Middle East to customers around the world.
But Trump’s comments later Monday, after the US stock market finished trading, were not as clear. And a spokesperson for Iran’s paramilitary Revolutionary Guard said that “Iran will determine when the war ends.” Iran launched new attacks Tuesday at Israel and Gulf Arab countries, keeping pressure on the Middle East in a war started by Israel and the United States.
That has Wall Street waiting for the next clue about how long the war may last.
One point where Trump remained clear was his desire to keep the Strait of Hormuz open. The war has effectively blocked much of the waterway off Iran’s coast, where a fifth of the world’s oil sails on a typical day. That’s been a central reason for oil prices’ extreme swings recently, which have dominated other financial markets and raised worries about the global economy.
“If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far,” Trump said in a posting on his social media network late Monday.
“The outlook for oil right now is about as binary as it gets,” according to Hakan Kaya, senior portfolio manager at Neuberger Berman.
“Either the Strait of Hormuz reopens and you see a massive unwind of the risk premium, or it stays shut and we are looking at the largest supply disruption in modern history. There is no middle ground, and that is why putting a number on it is almost irresponsible.”
The International Energy Association said it will hold a meeting on Tuesday to discuss whether the 32 countries that are members should release some of their oil stockpiles to push downward on the price of oil.
The US stock market has a history of bouncing back relatively quickly from past military conflicts, as long as oil prices don’t stay too high for too long. Uncertainty about whether that may happen this time around has led to stunning swings up and down for markets worldwide, often hour-to-hour.
If oil prices do stay high for long, household budgets already stretched by high inflation could break under the pressure. Companies would see their own bills jump for fuel and to stock items on their store shelves or in their data warehouses. It all raises the possibility of a worst-case scenario for the global economy, “stagflation,” where growth stagnates and inflation remains high.
On Wall Street, Vertex Pharmaceuticals leaped 8.5 per cent for one of the biggest gains in the S&P 500 after reporting encouraging trends from a trial for its treatment for a life-threatening kind of kidney disease.
Stock markets in Asia and Europe jumped in their first chances to react to Trump’s comments from late on Monday and the subsequent easing of oil prices. Indexes leaped 5.3 per cent in South Korea, 2.2 per cent in Hong Kong and 1.8 per cent in France.
Tokyo’s Nikkei 225 rose 2.9 per cent after the government also released revised economic data showing Japan’s economy grew faster in the final quarter of last year than initially estimated.
In the bond market, the yield on the 10-year Treasury was holding steady at 4.12 per cent, where it was late on Monday.
AP
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