US Markets Mixed as Oil Prices Surge – Nasdaq Falls 1.25%
US equity markets finished mixed yesterday as renewed concerns over an escalation of the conflict in the Middle East weighed on investor sentiment, particularly across the technology sector. The Dow Jones managed a modest gain of 0.10% to close at 51,231, while the S&P 500 declined 0.47% to finish at 7,765. The Nasdaq experienced the heaviest selling pressure, falling 1.25% to close at 27,193 as investors continued to assess the implications of rising energy prices and ongoing geopolitical uncertainty.
US Treasury yields moved lower across the curve, with strong demand for longer-dated bonds, particularly the 30-year Treasury at the latest auction in the New York session. The policy-sensitive 2-year yield declined 1.1 basis points to 4.757%, while the benchmark 10-year yield fell 5.6 basis points to 5.227%. The US dollar also weakened modestly against the major currencies, with the Dollar Index declining 0.13% to close at 102.12. Despite the latest pullback, the dollar remains relatively well supported by elevated US yields and persistent concerns over the inflationary implications of the Middle East conflict.
Oil prices recorded another volatile session as fears of further escalation in the Middle East drove a sharp rally in both major contracts. Brent crude surged 3.63% to close at $103.84 per barrel, while WTI gained 3.23% to finish at $91.13. Prices retreated from their intraday highs following comments from President Trump indicating that further US military action against Iran would be delayed until after the November mid-term elections. Nevertheless, concerns over potential supply disruptions continue to provide significant support for energy markets.
Gold extended its recent recovery, gaining 0.53% to close at $4,132.39 per ounce. The precious metal benefited from the weaker US dollar and declining Treasury yields, although its near-term direction remains closely linked to movements in both markets rather than traditional geopolitical safe-haven demand.
Middle East and Oil Still in Focus for Markets
Oil prices surged in volatile trading yesterday as renewed concerns over the conflict in the Middle East brought geopolitical risk firmly back into focus. Traders remain particularly sensitive to the possibility of further military escalation involving the US and Iran, with any additional disruption to regional energy supplies potentially driving prices sharply higher.
President Trump’s comments that he would not launch attacks against Iran before the November 3 mid-term elections helped prices retreat from their session highs. However, the market remains wary that this commitment could change quickly, particularly if fresh military developments force Washington’s hand, with traders noting that Iran is still attacking shipping on a daily basis.
The biggest risk for oil markets remains a sudden change in the geopolitical outlook. Any indication that Trump is preparing to reverse his commitment, particularly in response to further Iranian attacks on shipping or regional infrastructure, could see another aggressive move higher in crude prices. With tanker traffic through the Strait of Hormuz already under pressure, the potential for a further supply shock remains significant. The situation on the other side of the peninsula, between Saudi Arabia and Iran’s allies, the Houthis, also remains firmly in traders’ focus, and any moves there should also see a significant response in oil prices.
For traders, the upside risks remain firmly in play, and any fresh escalation over the weekend could leave oil markets vulnerable to another sharp gap higher when trading resumes next week.
Quiet Calendar but Busy Day to Close Out the Trading Week
Looking ahead, the economic calendar is relatively quiet as markets approach the end of the trading week. There is little of note on the calendar today in either the Asian or London sessions.
The North American session will feature Canadian employment data, with both Employment Change (exp. +6.1k) and the Unemployment Rate (exp. 6.5%) early in the day.
Attention will then shift south to the United States, where the preliminary University of Michigan Consumer Sentiment (exp. 47.5) and Inflation Expectations figures (last 4.6%) are due out. The inflation expectations component will be particularly important given ongoing concerns that elevated energy prices could contribute to renewed inflationary pressures and complicate the Federal Reserve’s monetary policy outlook.
While these releases have the potential to generate volatility, geopolitical developments are expected to remain the primary driver of market sentiment. With oil prices elevated and uncertainty surrounding the Middle East conflict continuing, investors are likely to remain cautious heading into the weekend, particularly given the potential for further developments while financial markets are closed.
Explore all upcoming market events in the Economic Calendar.
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