Oil Rally Weighs on Stocks as Middle East Tensions Escalate

Stock markets are under modest pressure this morning as renewed tensions between the United States and Iran continue to diminish expectations for a near-term diplomatic resolution. The escalation has sparked another sharp move higher in energy prices, with Crude Oil and Gasoline extending their recent advances as markets assess the potential for further supply disruptions.

Higher energy prices have also renewed concerns that inflationary pressures could become more persistent. That backdrop continues to push U.S. Treasury yields higher, weighing on equity sentiment as investors balance geopolitical uncertainty against the prospect of higher borrowing costs.

There are no major North American economic releases or corporate earnings reports scheduled before the opening bell today, leaving market participants primarily focused on developments in the Middle East and their potential implications for inflation, interest rates, and risk appetite.

U.S. equity futures are pointing to a softer open, with NASDAQ futures down 1.0% and Dow futures lower by 0.2%.

Overseas markets were mixed overnight. Japan’s Nikkei slipped 0.2%, while Hong Kong’s Hang Seng Index declined 1.0%. In Europe, Germany’s DAX is up 0.2%, while the UK’s FTSE 100 is advancing 1.3% after a better-than-expected U.K. inflation report supported investor sentiment.

Commodity markets remain the primary focus this morning. Crude Oil is up 3.3%, trading near US$87.00/bbl, while Brent Crude has gained 3.7% to trade above US$94.00/bbl. Gasoline is also higher, rising 1.4% to trade above US$3.40 per gallon. Precious metals are benefiting from the more cautious market tone, with Gold up 1.3% to trade above US$4,150 per ounce and Silver adding 1.0%. Copper is down 0.7%, trading near US$6.50 per pound.

Bond yields continue to move higher, with the U.S. 10-year Treasury yield climbing toward 4.65% and the 30-year Treasury yield approaching 5.15%. Currency markets are relatively quiet, with the U.S. Dollar little changed on the day. The Euro is up 0.1%, while the Canadian Dollar has also strengthened modestly by 0.1%.

Looking ahead, earnings season continues after today’s close with Alphabet scheduled to report quarterly results. Shares of Alphabet are held in some portfolios managed by SIA Wealth Management.

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