Traders are hedging their bets this morning, with the market mood changing quickly based on what’s happening in the world of geopolitics. Shares in Europe are ticking up with the FTSE posting a slight rise in early trading, while French and German indices started strongly but gave up gains as the morning went on. This is being paired with an increase in the oil price, as the reopening of the Strait of Hormuz isn’t happening as quickly as onlookers would like. The Brent Crude price is up 1.8 per cent this morning to nearly $98 per barrel despite trading as low as $95 yesterday. Bond yields in Europe are also up as the euphoria of a return to normality meets the harsh reality that that simply is not the case.
Conflicting reports and accusations that Iran is trying to charge a toll for ships to pass through the Strait are not helping, although the country has denied this, and neither are Israeli attacks on Lebanon. Markets are calmer about peace this morning after Israeli Prime Minister Benjamin Netanyahu said the country would seek talks with Lebanon, but did so only after attacking more than 100 sites yesterday, killing more than 300 people. The peace talks between the US and Iran will begin in earnest tomorrow, with US vice president JD Vance expected to arrive in Pakistan, which is hosting the talks, later today. Both sides are positive, but in this age of disinformation, financial markets are moving on any rumour. Yesterday, Kuwait said it had continued to intercept Iranian air attacks, although Iran denied it had broken the ceasefire. Oil traders were then perturbed after Saudi Arabia announced that its oil production capacity was down by 600,000 barrels a day following the attacks on its facilities over the past month. On a human level, peace is needed quickly, but the fallout from this war won’t go away overnight.
Stock market traders, however, are trying to focus on the positives, and yesterday’s session was okay, albeit with some volatility and mainly in Europe after a flash inflation print for the Eurozone showed the real impact of the oil price spike. The FTSE 100 posted a slight loss, held back by miners and oil stocks, but the S&P 500 rose 0.6 per cent for its seventh consecutive positive session, held up by tech as the Magnificent Seven rose 1.5 per cent. Futures show New York will open higher later on today as well.
Yesterday’s US personal consumption expenditure inflation, the Federal Reserve’s favoured print, came in as expected but covers the pre-war era. Today, we’ll see the more traditional consumer price index, which covers much of the period since the war began, and as with Europe yesterday, could bring a nasty surprise. Just another thing to add to the mix today.
By Taha Lokhandwala
