Oil and stock futures were largely unchanged on Sunday evening as financial markets reacted mutedly to Iran’s firing of tons of of missiles and drones into Israel on Saturday.
Major U.S. stock indexes and oil prices rose lower than 0.2%. West Texas Intermediate crude was below $86 a barrel and Brent crude was at $90.57. Analysts had previously predicted Brent could rise above $100 a barrel, having already risen 20% yr so far before the attack.
Prices for gold – traditionally seen as one other refuge – rose 0.4% to $2,383 an oz., but remain below record highs reached on Friday.
U.S. Treasury bonds, one other safety bet, saw a slight sell-off, sending the 10-year yield up 1.9 basis points to 4.518%. The dollar also fell against the euro and the yen.
Cryptocurrencies fell after recovering from losses on Saturday. Bitcoin fell 1.3% to $65,400 and Ether fell 0.3% to $3,156.
The muted initial response could also be attributable to optimism that the Middle East conflict won’t escalate. Although it was Iran’s first-ever large-scale military attack on Israel, 99% of the projectiles were fired and no fatalities were reported.
Meanwhile, the White House has signaled it’s trying to forestall hostilities from expanding. President Joe Biden reportedly told Prime Minister Benjamin Netanyahu that the US wouldn’t engage in offensive motion against Iran after pledging “ironclad” support for Israel’s defense.
Capital Economics said in a note early Sunday These rising tensions within the Middle East are likely to offer the Federal Reserve much more reason to slow its rate cuts as oil prices could disrupt the central bank’s fight against inflation.
“The key risks to the global economy are whether this escalates into a broader regional conflict and the response in energy markets,” wrote Neil Shearing, chief economist on the Capital Economics group
However, he added that potential counterweights include disinflationary pressures from China’s recent expansion of production capability, which has driven down export prices, in addition to calls from some OPEC+ members to pump more crude, which might result in lower oil prices.
Immediately following the Iranian attack, cryptocurrency prices fell sharply on Saturday evening but later recouped some losses. Earlier signs of market unrest got here on Friday when reports said an Iranian attack was imminent, sending benchmark U.S. oil prices up as much as 3% to above $87 a barrel.
U.S. Treasury bonds also rallied sharply, sending the 10-year yield down as much as 10 basis points as investors sought safety. The U.S. dollar gained on Friday as geopolitical tensions caused investors to show away from riskier emerging market currencies.
Gold prices rose to a brand new record high of over $2,400 an oz. before later reversing those gains. And stocks sold off on Friday, led by risk-on technology stocks, as investors also digested bank earnings and recent inflation data that further dampened hopes of imminent Fed rate cuts.
