Dow, S&P 500, Nasdaq futures sink while oil prices surge as Iran conflict rattles markets

Markets have begun to react to the U.S.-Israeli conflict with Iran, with airline, hotel and defense stocks all rising as global stock markets reopen this week. U.S. defense stock Lockheed Martin Corp (LMT) rose 7% in Monday’s pre-market, joining RTX (RTX) in the gains. BAE Systems (BA.L) shares rose 5% in London.

Energy companies also saw gains, with New Fortress Energy (NFE) rising 15% in pre-market trading and oil major Equinor ASA (EQNR) rising 4%.

Bloomberg News reports:

Read more here.

Gold prices rose strongly this morning to over $5,400 an ounce.

A helpful chart from JPMorgan shows how gold prices have reacted to previous conflicts in the Middle East:

The J.P. Morgan team believes that if the war spreads throughout the Middle East, oil prices will have the potential to rise to $120 per barrel:

“In our view, the main risk remains that the regime could lose command and control of the Islamic Revolutionary Guard Corps – as highlighted by the recent attacks in Oman – which would create more unpredictable and unstable conditions for regional oil supplies and markets. Hezbollah’s retaliation could further amplify these risks. A longer-term escalation – especially if Iran applies economic pressure – could push prices higher. We estimate that if the conflict continues for more than three weeks, GCC oil producers will exhaust storage capacity and be forced to shut down. In this scenario, Brent crude oil prices may be at 100 USD to $120 given the timing of these unknowns, we are not changing our current price forecast at this stage.”

Not surprisingly, the most visited stock pages on Yahoo Finance this morning include Exxon Mobil (XOM), Lockheed Martin (LMT), Chevron (CVX) and Occidental Petroleum (OXY).

You can view the full list of names here.

EvercoreISI provides some helpful charts on major oil exposures.

Oil prices surged this morning following the US attack on Iran.

Goldman Sachs thinks prices may still have a lot of room to rise:

“Based on a 15% increase in retail prices over the weekend, we estimate a real-time risk premium for crude oil prices of $18/bbl, which is roughly equivalent to our estimate of the fair value impact of a six-week full stoppage of flows in the Strait of Hormuz (taking into account the use of spare pipeline capacity as partial offset). This estimated impact would moderate to +$4 if only 50% of flows were stopped for a month. However, if the market demands a risk premium for a more persistent supply disruption, then oil prices could rise significantly.”

Here’s how Goldman Sachs sees markets after US attack on Iran:

“The impact is negative for equities and credit, but only severe and sustained oil supply disruptions would have a significant impact on global growth. We expect cyclical sectors and oil importers – some of which have started the year strong and may be vulnerable to position adjustments – may come under pressure unless a resolution is reached quickly.”

President Trump said on Sunday that the bombing campaign against Iran would continue for weeks and called on Tehran’s leaders to surrender. However, Iran’s security chief said he had no intention of negotiating with the United States.

Explosions continued in Bahrain, Kuwait, the United Arab Emirates and Qatar, and Gulf states intercepted missiles launched by Iran in retaliation for U.S.-Israeli attacks, a sign that the war is spreading beyond Iran’s borders.

Trump has called on Iran’s leaders to hand over power to the country’s people, and The Atlantic reported that Trump has agreed to hold talks with Iran’s new leadership.

The conflict has entered its third day since U.S. and Israeli forces began launching air strikes against Iran last weekend. The barrage of missile launches suggests Tehran is not ready to negotiate, despite the killing of the country’s top leader and senior military officials.

Bloomberg News reports:

Read more here.