Global equity markets made gains on Monday despite the escalating conflict in the Middle East, with Iran launching retaliatory airstrikes against U.S. bases in Qatar. The news caused oil prices to plummet after reaching multi-month highs earlier in the day.
On Wall Street, the main indexes closed higher, with energy stocks being the only sector to see losses. Equities initially dipped following reports that Qatar had closed its airspace in anticipation of Iranian attacks on U.S. forces in the country.
Iran’s military claimed responsibility for a missile attack on the Al Udeid U.S. airbase in Qatar, but U.S. officials confirmed that no American personnel were harmed in the assault. The attacks were in response to U.S. airstrikes on Iranian nuclear sites in support of Israel’s military campaign.
Despite the tensions, the Dow Jones Industrial Average rose by 0.89% to 42,581.78, the S&P 500 climbed by 0.96% to 6,025.17, and the Nasdaq Composite increased by 0.94% to 19,630.98.
European shares closed down by 0.28%, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell by 0.70%. However, MSCI’s global stock index rose by 0.49%.
In a significant move, Israel bombed Evin prison in northern Tehran and Revolutionary Guard command centers in the Tehran area. The Iranian parliament approved the closure of the vital Strait of Hormuz, a key shipping lane in the global oil trade.
Despite the turmoil, market sentiment remained positive, with Andrew Wells, Chief Investment Officer at SanJac Alpha in Houston, noting that the market’s resilience was surprising given the volatile events over the weekend.
Brent Crude futures closed down by 7.2% at $71.48 a barrel, while U.S. West Texas Intermediate crude dropped by 7.2% to $68.51. Both benchmarks had reached five-month highs earlier in the day.
Iran’s attacks were seen as an attempt at de-escalation, as the country had informed the U.S. via diplomatic channels before launching attacks on its Qatar base.
Furthermore, Iran had not disrupted shipping traffic through the Strait of Hormuz, a crucial waterway for global oil and liquefied natural gas trade.
Meanwhile, Federal Reserve Vice Chair for Supervision Michelle Bowman hinted at a forthcoming interest rate cut due to concerns about labor market risks and less worry about inflation caused by high import taxes.
In the currency market, the dollar strengthened against the Japanese yen but weakened against the Swiss franc. The euro saw gains after Bowman’s comments, while the dollar index fell.
Gold prices rebounded from early losses, with spot gold rising by 0.23% to $3,375.71, and U.S. gold futures settling 0.3% higher at $3,395.
Overall, despite the geopolitical tensions and market fluctuations, investors remained optimistic, underscoring the resilience of global markets in the face of uncertainty.
