Oil prices have surged above $100 US per barrel following unsuccessful ceasefire discussions lasting 21 hours in the ongoing conflict with Iran. Despite this, North American stocks are stable, indicating optimism on Wall Street for a potential resolution that would avert a worst-case scenario for the global economy.
The S&P 500 showed minimal change in morning trading, rebounding from an initial decline. The Dow Jones Industrial Average was down by 0.5%, or 256 points, as of 11:45 a.m. ET, while the Nasdaq composite saw a 0.3% increase. Meanwhile, in Canada, the S&P/TSX composite index rose by 2.30 points to reach 33,698.06.
In the oil market, prices spiked by approximately six percent, signaling growing concerns. However, the fluctuations were less dramatic compared to the extreme market swings witnessed since the conflict began in late February.
Following the failed ceasefire discussions over the weekend, U.S. President Donald Trump threatened to block the Strait of Hormuz. This move would further restrict global oil supply, compounding the existing price hikes resulting from Iran’s limitations on traffic in the crucial strait, a key route for oil transportation from the Persian Gulf. In response, Iran issued threats concerning all ports in the Persian Gulf and the Gulf of Oman.
The price of Brent crude, the global benchmark, surged to $101.90 US per barrel, significantly surpassing the pre-war price of around $70 US. However, it remained below the peak of $119 US reached during heightened tensions between the U.S. and Iran, and slightly retreated from the nearly $104 price recorded earlier that morning.
Investors found reassurance in the ongoing dialogue between the conflicting parties, with Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, noting, “Markets are taking some encouragement from the fact that the two sides are talking and that the broader ceasefire seems to be holding, for now.”
Amidst rising crude prices, oil-and-gas companies exhibited strength in the stock market, with Halliburton gaining 1.9% and ConocoPhillips climbing 1.1%. Treasury yields remained relatively stable, with the 10-year U.S. Treasury yield increasing marginally to 4.33% from 4.31% at the close of trading on Friday.
In global stock markets, indexes in Europe and Asia experienced declines. Hong Kong’s Hang Seng dropped by 0.9%, and South Korea’s Kospi fell by the same percentage, registering significant losses in two of the world’s major markets.
Neil Newman, managing director and head of strategy at Astris Advisory Japan, expressed concern in Hong Kong over the outcome of the U.S.-Iran negotiations, stating, “The outcome of the talks was not really what people were hoping for, that’s for certain… Certainly, the oil prices are a big concern.”