Israel Iran Conflict Drives Oil Prices Up 7.02%

Stock futures pointed lower on Sunday as investors weighed the impact of the escalating Israel-Iran conflict that shows no signs of any potential off-ramps ahead. Oil prices jumped after Israel attacked key areas of Iran’s energy infrastructure over the weekend, while Tehran said closing off the Strait of Hormuz was under serious consideration. The Strait of Hormuz is a critical waterway for global energy trade, with approximately 21 million barrels of petroleum liquids passing through it daily, accounting for about 21% of global consumption.

U.S. stocks signaled more downside on Sunday night as oil prices jumped amid the escalating Israel-Iran conflict. The conflict, which began on Friday, has seen both sides launch significant attacks on each other's infrastructure, with Israel targeting Iran's military leadership, nuclear facilities, and bases, and Iran retaliating with strikes on key areas of Israel's energy infrastructure, including oil refineries, fuel depots, and a massive natural gas field.

The escalating tensions have led to a significant surge in oil prices, with U.S. oil prices jumping 3.8% to $75.75 per barrel, and Brent crude shooting up 3.9% to $77.13. This follows a 7% jump in oil prices on Friday as markets reacted to the early stages of the conflict. The surge in oil prices has reignited inflation fears, putting upward pressure on the 10-year Treasury yield and dimming hopes for rate cuts from the Federal Reserve later this year.

The conflict has also had an impact on other markets, with the dollar falling 0.23% against the euro and 0.39% against the yen, and gold rising 0.28% to $3,462.50 per ounce. The yield on the 10-year Treasury slipped 1.7 basis points to 4.407%.

The escalating tensions between Israel and Iran have led to a significant surge in oil prices, with Brent crude futures settling at $74.23 a barrel, up $4.87, or 7.02%, after earlier soaring over 13% to an intraday high. This surge in oil prices reflects the market's concern over potential disruptions in oil supply due to the conflict. The uncertainty surrounding the conflict has also led to a decline in global stock markets, as investors grapple with both short-term volatility and long-term supply concerns.

The conflict has also had an impact on the energy sector, with global stock markets dropping and oil prices surging after Israel launched a wide-ranging attack on Iran's nuclear facilities. The attack has sent shockwaves through the market, with investors worried about the potential for further escalation and the impact on global energy supplies.

The market's reaction to the conflict has been swift, with US markets closing sharply lower on Friday. The Dow Jones Industrial Average fell 800 points, while the Nasdaq Composite dropped 1.30% to 19,406.83. The market's reaction reflects the uncertainty surrounding the political calculus of the conflict and the potential for further escalation.

Inflation, tariffs, and the volatile geopolitical landscape will be top of mind when Fed policymakers are due to meet this Tuesday and Wednesday. While they aren’t expected to adjust rates, they will release a fresh set of forecasts for future rates and economic indicators. Chairman Jerome Powell will also hold a press briefing on Wednesday afternoon.