The initial response of the US financial markets to media reports indicating a heightened likelihood of intensified conflict in the Middle East includes:
A decrease in stock prices (0.8-2%),
A drop in government bond yields (5-7bps), and
An increase in oil prices (3%).
What might surprise some: Decreased prices…— Mohamed A. El-Erian (@elerianm) October 1, 2024
On Tuesday, Iran launched over 100 ballistic missiles towards Israel, causing oil prices for West Texas Intermediate (WTI) and Brent to experience their largest increases in nearly a year. The tech-centric Nasdaq Composite was the worst performer in the stock market, losing around 1.5%. The Dow Jones Industrial Average fell approximately 0.4%, while the S&P 500 closed the day down about 0.9%.
#BreakingNews | Wall Street finished the day with losses as increasing tensions in the Middle East impacted the markets. All major indices ended in the negative #WallStreet #MarketUpdate #MiddleEastTensions #StockMarket pic.twitter.com/L7ncm3rr3o
— ET NOW (@ETNOWlive) October 2, 2024
In an unexpected turn, job openings rose in August, reaching 8.04 million by the month’s end, compared to 7.71 million in July. Nonetheless, the labor market showed signs of slowing down. The Institute for Supply Management (ISM) disclosed that its manufacturing PMI remained steady at 47.2 last month.
While unchanged, this figure indicates a contraction since a PMI beneath 50 represents a decline in the manufacturing sector. On Tuesday, shares of Nike fell approximately 2% in after-hours trading despite the company surpassing expectations for its first-quarter earnings. The footwear giant posted first-quarter earnings per share of $0.70, exceeding Wall Street’s projection of $0.52.
Global Market Update | USA: Markets closed lower on Tuesday as caution prevailed among investors following Iran’s missile strikes on Israel 📉
Nasdaq Composite dropped 1.5%, DJIA decreased by 0.41%, and S&P 500 fell by 0.9%#StockMarket #Nasdaq #DJIA #SP500 #MarketUpdate pic.twitter.com/nLs8qdi5fJ
— ET NOW (@ETNOWlive) October 2, 2024
Oil prices surge as concerns about supply rise in the wake of Iran’s missile attack https://t.co/Gr05WyrgdN via @ft
— Linda Yueh (@lindayueh) October 2, 2024
Spike in oil prices following Iran’s missile attack
Nonetheless, Nike’s revenue of $11.59 billion fell short of analyst projections of $11.65 billion. Oil prices surged significantly on Tuesday due to the Iran-Israel conflict.
West Texas Intermediate climbed over 3% to trade slightly above $70 per barrel, and Brent increased roughly 3% to stand around $74 per barrel. James Reilly, a senior markets economist at Capital Economics, mentioned that the influence on oil prices is a critical transmission channel for the global economy. He highlighted that any escalation by Iran could potentially involve the US, introducing further risks.
Energy and utilities sectors were the day’s winners, rising around 1.8% and 0.4%, respectively. The energy sector gained significant traction as crude oil prices spiked approximately 4%. Meanwhile, Americans left their jobs at the lowest rate since June 2020, signaling further cooling in the labor market.
Super Micro Computer’s stock fell over 3% after a 10-for-1 stock split and an ongoing investigation by the US Department of Justice regarding potential accounting infractions. Investors are eagerly awaiting the jobs report due on Friday to gain more insights into the direction of the US economy.
