Stocks fall, oil surges after US military strikes against Iran
US equity futures are lower, oil is up, and safe haven assets like gold and the US dollar are getting a bid.
It’s a risk-off tone in markets to start the week after the US launched a series of attacks against Iran starting on Saturday.
ETFs that track US benchmarks are lower, with the SPDR S&P 500 ETF off a little less than 1% and the Invesco QQQ Trust down more than 1% as of 6:55 a.m. ET.
Front-month West Texas Intermediate crude oil futures spiked around 7%, gold gained about 2%, and the Dollar Spot Index is up roughly 0.6%. Early modest gains in longer-term US government bonds swung to mild losses.
At the single-stock level, higher-beta, speculative names in technology are being hit hard, while defensive sectors are holding up better. A number of defense stocks, including Lockheed Martin, RTX, and Northrop Grumman, are all trading higher, gaining 6% to 7%.
Energy giant Exxon and AI software and defense firm Palantir Technologies are up about 4%. Airline stocks also came under pressure, reflecting higher oil prices and flight disruption in the region. Cruise operators Norwegian Cruise Line, Carnival, and Royal Caribbean are also deep in the red amid this upward pressure on fuel costs, with Norwegian’s underwhelming full-year earnings forecast adding to the stock and industry’s woes.
The campaign, known as “Operation Epic Fury,” is intended to destroy Iran’s military capabilities and spur leadership change, according to US President Donald Trump, who cited “imminent threats” from its regime as the rationale for these strikes. Israel is supporting the US Armed Forces in this mission.
Iranian Supreme Leader Ayatollah Khamenei was killed in these strikes, the president wrote in a Truth Social post on Saturday, which has also been confirmed by Iranian state media.
The Middle Eastern country is the fifth-largest oil-producing nation in the world, 2024 Energy Institute data shows, pumping out just over 5 million barrels per day.
“A prolonged conflict stemming from a US desire for regime change could ensure the current episode looks different to what we’ve seen since 2023,” Viresh Kanabar, an investment strategist at Macro Hive, wrote in a note on Saturday afternoon. “Namely, that prices rise further for longer rather than falling after the fact.”
Perhaps more importantly, however, is that Iran borders the Strait of Hormuz — an important choke point for global energy flows, with around 20% of global petroleum liquids consumption flowing through it in any given year. Hence, oil is likely to be the asset most sensitive to news regarding this conflict. Early reporting on Monday suggests that Iran has told vessels not to pass through the crucial strait, with international shipping coming to near standstill at the entrance, the BBC reports.
“Even though traffic through the Strait of Hormuz has dropped to near zero, this is largely precautionary, after insurers warned that they would cancel policies and raise premiums, rather than the result of direct attacks on the waterway,” wrote Natasha Kaneva, head of global commodities research at JPMorgan. “To restart traffic, the US Treasury could provide insurance or guarantees for ships transiting the strait — a step it has taken in past crises.”
