Stocks opened Wednesday on a somber note, as escalating tensions in the Middle East triggered a surge in oil prices. Investors grappled with uninspiring earnings reports from Morgan Stanley and a decline in trading activity on Wall Street.
The Dow Jones Industrial Average saw a dip of over 0.2%, while the benchmark S&P 500 experienced a nearly 0.5% decline. The Nasdaq Composite, heavily weighted towards technology stocks, slipped 0.3%.
Against the backdrop of heightened geopolitical tensions, Israeli and Palestinian authorities exchanged accusations following an explosion at a Gaza hospital. President Joe Biden’s arrival in Israel was marred by the cancellation of a scheduled summit with Arab leaders by Jordan, citing the blast as the cause. Biden’s assertion that the responsibility lay with the “other team” dampened prospects for a diplomatic resolution, underscoring the looming risk of a full-blown regional conflict.
Oil prices surged by more than 1%, spurred by Iran’s foreign minister’s call for an embargo against Israel. As a result, crude oil futures soared to $88 a barrel, while Brent crude stood at $91 a barrel in the latest assessment. Additionally, the spike in fuel costs introduced another inflationary variable for investors to contemplate, as they deliberate on the Federal Reserve’s upcoming decisions regarding interest rates.
Following robust retail sales on Tuesday, which fueled expectations of a further interest rate hike by the Federal Reserve later this year, major U.S. stock indices concluded the day with marginal gains. Post-market, attention turned to tech giants Tesla and Netflix, whose earnings reports will be scrutinized for potential impacts from sustained “higher for longer” interest rates. In the tech sector, ASML’s shares took a hit after the Dutch chip equipment manufacturer cautioned about an impending plateau in sales. Nvidia also experienced a setback as the U.S. tightened restrictions on exports of AI chip technology to China.
As investors navigate the volatile terrain, the trajectory of stocks remains intrinsically tied to the unfolding developments in the Middle East. Investors remain poised to dissect tech sector earnings and closely monitor the Federal Reserve’s response to mounting inflationary pressures and resilient retail sales figures.
Source: Yahoo Finance