Oil hits multi-week high, Wall Street slips as Iran tensions reignite
Market Reactions to Renewed Iran Tensions
By Pete Schroeder
Oil Prices Surge Amid Middle East Unrest
WASHINGTON, July 8 (Reuters) - Stocks were mostly lower and oil prices rose on Wednesday after U.S. President Donald Trump said the interim peace deal with Iran was "over" and the U.S. announced fresh military strikes.
Oil prices settled nearly 5% higher as tensions reignited in the Middle East and worries mounted that global energy supplies could again be upended if vessel movement through the Strait of Hormuz is halted.
Brent and WTI Crude Reach Multi-Week Highs
Brent futures LCOc1 rose $3.86, or 5.2%, to settle at $78.02 a barrel, the highest since June 19. U.S. West Texas Intermediate (WTI) crude CLc1 rose $3.08, or 4.4%, to $73.52, the highest since June 22.
Strategic Petroleum Reserve at Historic Lows
Data this week showed crude stocks in the U.S. Strategic Petroleum Reserve hit their lowest level since 1983, leaving markets more vulnerable to future supply shocks.
Wall Street and Global Stock Market Performance
On Wall Street, the Dow Jones Industrial Average suffered the steepest selloff, closing down 1.09%, to 52,348.09. The S&P 500 also ended lower, dipping 0.28%, to 7,482.59, while the Nasdaq Composite eked out a 0.2% gain to 25,870.65.
IMF Warning Deepens Stock Market Pessimism
Stock market pessimism was also deepened on Wednesday by a new warning from the International Monetary Fund that the conflict will cut into global growth this year.
MSCI's gauge of stocks across the globe fell 0.60%, to 1,114.54.
Federal Reserve Minutes and Monetary Policy
Market reaction was muted to minutes released by the Federal Reserve detailing Chairman Kevin Warsh's first rate-setting meeting, which showed concern about mounting inflation.
Forward Guidance and Investor Sentiment
More notable to investors was Warsh's desire to limit forward guidance, suggesting that investors may have fewer clues to future Fed moves.
"The Fed is choosing to tell markets less in the post-meeting statement, with forward guidance placed much more firmly in the rear-view mirror," said Russ Brownback, BlackRock's deputy chief investment officer of global fixed income, in a note.
"While the minutes themselves retain a familiar structure, the statement and forward-looking policy language are notably more guarded," he said.
Bond, Currency, and Commodity Market Movements
U.S. Treasury Yields Extend Gains
Benchmark 10-year U.S. Treasury note yields rose for a seventh day, last up 4.01 basis points at 4.569% after reaching a one-month high of 4.58%.
Dollar and Yen Fluctuate Amid Uncertainty
In currency markets, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.22% to 100.96. The yen hovered around 162.4, not far from 40-year lows.
Gold Prices Drop Despite Inflation Concerns
Renewed Middle East tensions and ensuing inflation concerns also weighed on gold prices, where spot gold fell 0.52% to $4,084.19 an ounce, and U.S. gold futures dropped 1.45% to $4,085.00 an ounce. Although gold is often viewed as a hedge against inflation, the non-yielding metal tends to lose appeal in a high-interest-rate environment.
(Reporting by Pete Schroeder in Washington; additional reporting by Amanda Cooper in London and Tom Westbrook in Singapore; Editing by Kevin Buckland, Jan Harvey, Hugh Lawson and Edmund Klamann)
