Global financial markets continue to face pressure after the US military’s surprise attack on three Iranian nuclear sites last weekend. The geopolitical tensions have sparked uncertainty in oil and stock markets, as well as raising big questions about stability in the Middle East and its impact on the global economy.
1. Volatile Stock Futures Market
US stock futures markets showed volatile movements on Monday, with the Dow barely changed, while the S&P 500 and Nasdaq 100 each rose around 0.2%. Investors are now assessing the latest geopolitical risks to inflation, interest rates and overall market sentiment.
2. Oil Prices Soar, Then Fall Slightly
Oil prices surged on Monday before their gains eased slightly. Brent traded at $77.17 a barrel while WTI was around $72.15. Tensions in the Strait of Hormuz, a vital oil export route, have raised concerns about supply disruptions. Analysts have warned that the surge in oil prices could reignite inflationary pressures and complicate the Federal Reserve’s efforts to cut interest rates.
3. Iran Vows to Retaliate, Trump Hints at Regime Change
Tehran has yet to formally announce any retaliation, but has warned of “lasting consequences” and not ruled out any options. Meanwhile, President Trump has been raising the issue of “regime change” on social media, raising fears of a wider conflict.
Iran has also hinted at blocking the Strait of Hormuz or attacking US military bases in the region. Iran’s retaliatory air strikes on Israel have also intensified, escalating regional tensions.
4. Trump’s Mega Fiscal Bill Accelerated
In Washington, the US Senate is preparing to pass its version of a massive tax and spending bill, which includes an extension of the 2017 tax cuts and increased spending on defense and border security. The costs will be partly offset by cuts to programs such as Medicaid. However, some elements of the bill are expected to face legislative hurdles in the Senate.
5. Economic Data to Focus Investors
Apart from geopolitics, investors are also focusing on economic data to be released this week. The manufacturing and services PMI indices are expected to record small declines, while consumer confidence and inflation readings will determine the direction of US monetary policy.
