Key Takeaways
- US stocks were lower Thursday after declining in the prior session.
- European and Asian markets dropped on Thursday as fresh attacks on Middle Eastern energy infrastructure drove energy prices higher.
- LNG prices spiked 25% while oil ticked higher, with Brent crude hitting USD 116.
US stocks opened firmly lower on Thursday, following global peers, as investors digested a series of fresh attacks on key Middle Eastern energy infrastructure and a slew of central bank decisions.
The S&P 500 benchmark was down 0.9% at the start of trading while the more technology-heavy Nasdaq 100 index was down 1.3%. The Morningstar US Market Index was 0.1% lower.
“As the conflict deepens, the market is rightly concerned. This mainly stems from the rise in the price of oil, which may hit fresh highs if the threats to oil facilities in the Middle East are carried out,” says Morningstar’s chief European markets strategist Michael Field.
With European and Asian economies more reliant on energy imports than the US, there has been a clear pattern of US stock outperformance since the conflict’s beginning.
The Morningstar Europe Index was down 2%, with similar declines across regional indices, with mining stocks bearing the brunt of losses. With a decline of more than 7% since the start of fighting, the index is on track for its worst month since June 2022.
Brent crude oil futures rose 5% to USD 113 and WTI crude added nearly 2% to USD 98.
“We’re still sticking with our longer-term forecast of USD 65 a barrel, but in the short-term a lot can happen, and this is having knock-on effects,” Morningstar’s Field says.
Qatar said Thursday that Iran had inflicted “extensive further damage” on its Ras Laffan terminal, the world’s largest liquefied natural gas facility. A day earlier, Israel had struck Iran’s South Pars gas field, the world’s largest.
US President Donald Trump warned Wednesday that if Iran continued targeting Qatar’s energy facilities, the US would “massively blow up the entirety of the South Pars gas field.”
“In contrast to previous Middle East conflicts, the US is not drawing broad support from other Western nations,” says Derren Nathan, head of equity research at Hargreaves Lansdown. “For now, the path back to the negotiating table looks far from clear, but as economic reality sets in, things could change. Any steps in this direction could provide welcome relief for stock markets.”
Global markets are also focused on a slew of key central bank decisions Thursday amid fears that the war in Iran could spark a resurgence in inflation, triggering more hawkish monetary policy.
The US Federal Reserve held rates steady on Wednesday, as expected, and emphasized uncertainty in the economic outlook, while signaling one likely rate cut this year. The Bank of Japan, the Swiss National Bank and Sweden’s Riksbank similarly maintained rates Thursday, while the European Central Bank and the Bank of England are all but certain to do the same later in the day.
Government bond yields continued their ascent on the weakening economic picture. Yields on UK 10-year gilts rose 0.08 percentage points to 4.83% as 10-year German bunds added 0.03 percentage points to 2.97%. US 10-year Treasuries rose 0.03 percentage points to 4.29%.
