Dow, S&P 500, Nasdaq futures tumble as oil prices surge to over $100 a barrel

Bloomberg reports:

Global bond markets fell on Monday as an oil price shock prompted investors to consider rising inflation and worsening economic growth prospects.

The benchmark 10-year Treasury note (^TNX) yield rose more than three basis points to 4.17%, while the policy-sensitive two-year note rate rose four basis points. Traders lowered expectations for the Federal Reserve’s next 25 basis point interest rate cut in September. Traders had fully priced in this move in July, before the war in the Middle East broke out. Bond options show some traders are betting the Fed may not cut interest rates at all this year.

Moves in Europe and the UK are more aggressive: the swaps mean there is a 60% chance of the European Central Bank raising rates twice this year, while the chance of one hike by the Bank of England before the end of the year is just under 50%. The yield on German two-year government bonds surged 9 basis points to 2.40%, and the yield on British two-year government bonds surged 30 basis points to 4.17%, the largest increase since October 2022.

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From Bloomberg:

European blue-chip stocks fell and were set for a correction as rising conflict in the Middle East sent oil prices surging above $100 a barrel, reigniting concerns that inflation could curb economic growth.

As of 8:47 a.m. in London, the Stoxx Europe 50 index (^STOXX50E) fell 3.1% to 584.56 points, down nearly 10% since its February peak, as the Iran war weighed on stocks. The broader Stoxx Europe 600 (^STOXX) index fell 2.4%.

Among sectors, mining stocks, banking stocks, retail stocks, construction stocks and tourism and leisure stocks led the decline. Airline stocks fell, with Lufthansa shares down 4.9%. LVMH fell 2.0% as concerns about weak consumer demand weighed on luxury goods stocks. The energy sector outperformed the broader market, with oil majors such as Shell and BP rising 2.1% and 1.3% respectively.

Europe’s main stock benchmark Stoxx Europe 600 index last week recorded its biggest weekly loss since April. The Middle East conflict enters its tenth day with few signs of easing after Iran appointed the son of the late Ayatollah Ali Khamenei as its new supreme leader and military strikes continued.

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Optimism in financial markets about a speedy resolution to the Middle East conflict is fading fast.

Bloomberg reports:

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The Financial Times reports:

G7 finance ministers will discuss the possibility of a joint release of oil reserves coordinated by the International Energy Agency at an emergency meeting on Monday, aimed at countering a surge in oil prices following the Gulf conflict.

Ministers and International Energy Agency executive director Fatih Birol will hold a conference call at 8:30 a.m. New York time to discuss the impact of the war with Iran, according to people familiar with the matter, including senior G7 officials.

Three G7 countries, including the United States, have so far expressed support for the idea, according to people familiar with the matter.

The IEA’s 32 member countries hold strategic reserves as part of a collective emergency system to deal with the oil price crisis. Some U.S. officials believe a joint release of 300 million to 400 million barrels of oil – 25% to 30% of 1.2 billion barrels of reserves – is appropriate, one person said.

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Key indicators in Asia fell more than 5% as the U.S. and Israel’s war with Iran is seen as causing global instability. The drop in oil prices was driven by a surge in oil prices, which is a potential indicator of a coming recession.

AP Financial Report:

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Bloomberg reports:

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Yahoo Finance’s Jack Conley reports:

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