U.S. stocks are falling in risk-off trade after Israel launched an attack on Iran overnight, hitting risk sentiment and pulling stocks lower, whilst surged. Safe haven has rallied, and the has also seen safe haven demand for the first time in months. Headline risk remains a key driver and developments over the week could impact Monday’s open.
US Stocks Fall on Risk-off Trade
U.S. stocks are falling in risk-off trade after Israel launched an attack overnight, hitting risk sentiment, whilst oil prices surged.
Israel’s airstrikes against Iran’s nuclear programme and ballistic missile sites renewed the standoff between the two countries that risks broadening out into the wider region. While the biggest reaction seen in crude oil, the risk off flows suggests investors are uncertain over how long tensions will last and whether they will escalate further.
Stocks in Asia, Europe, and US futures are under pressure, while safe-haven gold spiked to a peak of 3444, a level last seen, and the price rose to its record high in April.
In the short term, this is likely being seen as a good excuse for taking some profit after solid gains in the equity market.
The news comes amid a jittery market after President Trump warned that a wide range of trading partners would be advised of unilateral trading tariffs in the coming weeks as the July 9 deadline looms nearer.
On the data front, will be in focus and is expected to show a slight improvement. The data comes ahead of next week and the Federal Reserve decision, where the central bank is expected to leave rates unchanged until it becomes clearer how tariffs impact the US economy.
Corporate News
Tesla (NASDAQ:) is falling over 1% after the EV manufacturer upgraded its Model S and Model X cars in the US while raising their prices by $5000.
Apple (NASDAQ:) is outperforming the broader market after data from Counterpoint Research showed iPhone sales rose to the top spot in China last month, and the global sales group increased 15% year on year in April and May.
Oil majors such as Chevron (NYSE:) and Exxon (NYSE:) are gaining around 3% as crude oil prices soared to their highest level since late January.
Airlines such as Delta Airlines (NYSE:), United Airlines (NASDAQ:), Southwest Airlines (NYSE:), and American Airlines (NASDAQ:) are all dropping sharply amid a surge in crude oil prices and concerns over higher fuel costs.
Defence stocks such as Lockheed Martin (NYSE:) and Northrop Grumman (NYSE:) are on the rise amid heightened geopolitical tensions.
Dow Jones – Technical Analysis
The recovery from April lows pushed above the 200 SMA before running into resistance around 42,800. The price is easing lower, testing the 200 SMA at 42,600 after briefly sparking to a low of 42,175. Should sellers close below the 200 SMA, the door opens to 41,800 horizontal support. Should the 200 SMA hold, buyers will look to extend gains above 43,150 towards 44,000.
FX Markets – USD Falls, EUR/USD Rises
The USD is rising, recovering from a multi-year low yesterday, boosted by safe-haven flows. For the first time in months, the USD is behaving like a safe haven. However, with Trump’s trade tariff uncertainty lingering, the USD could find the upside limited.
The is falling to 1.1550, back from yesterday’s multi-year high, as the USD rises and on risk aversion. confirmed 2.1% while eurozone fell 2.4% YoY in April.
is falling amid a stronger USD and in risk-off trade. Pension is turning to the Bank of England decision next week. The central bank is likely to keep interest rates unchanged as inflation remains at 3.5% and despite signs of weakness in the UK jobs market.
Oil Soars After Israel Attacks Iran
Oil prices have surged by as much as 11% at one point on Friday, but have eased back to 7% gains on the day after Israel launched strikes against Iran.
Tensions in the Middle East are ramping up, raising concerns about oil prices lifting the risk premium on oil. These were the largest intraday moves seen in oil contracts since 2022.
Headlines will be watched closely, particularly given concerns over whether the latest developments will affect the Strait of Hormuz. This key waterway sees around 1/5 of the world’s consumption passing through it. So far, there has been no disruption.
Where oil prices go from here depends on whether there is further escalation over the weekend and then into next week.
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