US stock market rises as oil prices drop amid geopolitical tensions
United States (US) stocks closed higher overnight, while crude oil prices fell 9.20% to $67.20 following Iran’s pre-signalled retaliatory missile strike on a US air base in Qatar.
The rally in US equity futures and the sell-off in oil futures continued this morning after US President Donald Trump announced a ceasefire between Iran and Israel.
- US (S&P) 500 futures are trading 0.55% higher at 6110
- Crude oil futures are trading 1.5% lower at 66.24, more than 15% below yesterday’s 78.40 high, as the risk premium built into crude oil prices rapidly evaporates.
Ceasefire lifts risk appetite, but uncertainties remain
If the ‘Twelve Day’ war has indeed ended, market movements could extend. However, there are limitations due to uncertainty surrounding key issues.
Nuclear material risks
The first concern is the whereabouts of 400 kilograms (kg) of enriched uranium that was moved from nuclear facilities, including Fordow and Natanz, just before the US bombing of Iran’s nuclear facilities to prevent seizure or destruction.
In the wrong hands, this uranium could be used as a bargaining chip or further enriched to weapons-grade quality in clandestine centrifuges in Iran or with foreign assistance. Mishandling it poses contamination and radiation risks, even without weaponisation.
Regime durability
Another key uncertainty is whether the current Iranian regime will retain power and continue its 45 years of funding and supporting various militant groups and activities abroad, as well as continuing its human rights violations and restricting the freedoms of its population.
Although these issues remain unresolved, we expect the market, which has a notoriously short attention span, to refocus on tariffs and the Federal Reserve (Fed). The Board members are showing increased division ahead of Fed Chair Jerome Powell’s testimony at midnight.