U.S. stock futures opened sharply lower on Sunday evening, March 1, as global investors reacted to the weekend strikes in the Middle East that killed Iran’s Supreme Leader Ayatollah Ali Khamenei, snarled global energy supply chains, and threatened a broader conflict.
Geopolitical events are always a potential source of market upheaval, but they rarely have severe, widespread impacts. The weekend skirmishes between the U.S., Israel, and Iran could be different, some analysts say.
“We expect markets to react more broadly to this weekend’s attacks than other recent geopolitical events,” said analysts at TD Securities in an analysis released March 1. That’s because the impacts are more broad-based. Energy supplies are disrupted in the short term, even as the possibility of the conflict spreading looms.
What’s more, stocks were already on the back foot due to fears of disruptions from AI and distress in the private credit markets, said Jay Hatfield, CEO and CIO at Infrastructure Capital Advisors, a fund management firm, in an email exchange with USA TODAY.
Expect investors to sell stocks and buy bonds, Hatfield said. That trade had already begun in the days before the strikes, as investors began to price in the possibility that the S&P 500 fell 0.4% on Friday, while the benchmark U.S. 10-year note fell five basis points to close below 4%. Bond yields (interest rates) fall when prices rise, and vice versa.
On Sunday, U.S. stock index futures were down about 1% each.
Global investors may also flock to the US dollar, sending it higher after a period of selling, Goldman Sachs analysts wrote in a March 1 piece. Similarly, while U.S. stocks have performed worse than “the rest of the world” so far this year, the S&P 500 is essentially unchanged. Meanwhile, the Vanguard FTSE All-World ex-US Index Fund ETF is up more than 11%, putting the U.S. in a better position to withstand a prolonged oil price shock.
Analysts are also bracing for oil prices to hit at least $90 a barrel, and possibly more. Brent crude, the global benchmark, was trading around $80 a barrel around 6 p.m. ET on March 1.
Gold may be one of the biggest winners of the conflict. The precious metal “could surge as much as $200/oz on the open, with silver likely to rally, as well,” TD analysts wrote.
This article originally appeared on USA TODAY: US stocks fall, oil jumps amid US-Israel strikes on Iran
