(April 24): A fresh bout of volatility rattled markets, with stocks falling as oil rose on concern about an escalation of the conflict in the Middle East that could prolong the Strait of Hormuz closure, worsening energy disruptions.
The standoff drove Brent above US$105 on worries that peace talks have stalled, rhetoric is amping up and military threats are increasing. A rally in the S&P 500 paused, with the index dropping as much as 1.3% before paring its decline. In late hours, Intel Corp surged on a strong outlook, fueling gains in chipmakers. The group notched a 17th straight advance in regular trading.
President Donald Trump ordered the US Navy to shoot any boat putting mines in the strait, while the military said it intercepted two oil supertankers that tried to evade its effort to prevent passage to and from Iran’s ports.
Later in the day, Trump said that if Iran doesn’t move oil, its infrastructure will explode. He also noted that Iran wants to make a deal, and the US has been speaking with the country. Trump also said that Americans should anticipate spending more on gasoline “for a little while.”
Meantime, Iran’s Mehr news agency reported that air defense systems were activated in parts of Tehran to counter “hostile targets” while semi-official Fars said that happened in response to small drones.
“There’s a fair bit of uncertainty when it comes to diplomacy between the two sides,” said Fawad Razaqzada at Forex.com. “Less comforting is the ongoing lack of clarity around the Strait of Hormuz. With no clear plan to reopen it, uncertainty remains elevated.”
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Traders also sifted through earnings. Software shares got hit as International Business Machines Corp and ServiceNow Inc’s numbers failed to ease concerns about artificial-intelligence disruption. Tesla Inc slid as plans to boost spending overshadowed better-than-expected results. Texas Instruments Inc jumped on a solid outlook.
Meantime, Meta Platforms Inc and Microsoft Corp have both taken actions to trim their workforces in an effort to streamline their operations and offset AI spending.
Despite lingering geopolitical risks, the S&P 500 is poised for its best month since 2023 amid strong corporate profits and an otherwise resilient economy. Nearly 80% of the US equity benchmark’s firms have beaten first-quarter earnings estimates so far, according to data compiled by Bloomberg.
See also: US stocks advance as earnings help distract from US-Iran impasse
While volatility understandably increased with the onset of the Iran conflict, financial markets have proven relatively resilient, noted Adam Hetts and Oliver Blackbourn at Janus Henderson.
“Investors coalesced around the critical assumption that hostilities and the associated disruptions to the global economy would be short lived,” they said. “Our sentiment and positioning indicators showed drawdowns within several market segments reaching capitulation territory and could therefore represent attractive entry points.”
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