- Crude Oil
Crude prices rose on Monday, briefly touching five-month highs as geopolitical risks in the Middle East escalated. Investor anxiety is mounting over potential Iranian retaliation following U.S. strikes on its nuclear facilities, especially after Iran’s parliament approved measures to potentially block the Strait of Hormuz.
While oil prices initially reacted to the headline risk, they are now somewhat brushing off immediate conflict concerns, with markets instead eyeing Iran’s next move. While markets are currently pricing in uncertainty rather than full-scale escalation, any disruption, whether selective interference with shipping or full closure, could severely impact supply chains. Although a complete shutdown would also hurt Iran’s own oil exports, even harassment of tanker traffic may be enough to significantly reprice geopolitical risk. The crude market is likely to stay supported on risk premium and supply concerns. The CBOE crude oil volatility index, which measures the market’s expectation of 30-day volatility in crude oil prices, is at March 2022 levels, which it hit shortly after Russia invaded Ukraine.
Crude briefly broke above a key descending trendline that has capped gains since September 2023 but failed to hold momentum, pulling back to retest that same level around $76.5, which now acts as resistance. A clean break above this level would confirm a bullish continuation. Immediate support lies at $75.8. Price action remains constructive above these levels.
- US Markets
U.S. stocks edged lower Monday as geopolitical tensions escalated following U.S. airstrikes on Iranian nuclear sites in Fordo, Isfahan, and Natanz. The strikes, ordered by President Trump, marked a sharp escalation in the Israel-Iran conflict, with markets bracing for Iranian retaliation. The Dow slipped 0.3%, while the S&P 500 and Nasdaq 100 dropped 0.26% and 0.35%, respectively.
Trump’s surprise Saturday address warned of a “tragedy far greater” if Iran escalates further, catching investors off guard after suggesting a decision might take “two weeks.” The geopolitical shock has injected short-term volatility into markets, which could persist for weeks. Last week, the S&P 500 declined 0.15%, its second straight weekly loss, although it remains just 3% below record highs.
Markets now face several headwinds: elevated oil prices, heightened war risks, and uncertainty around global trade reshaping under Trump’s administration. Much depends on Iran’s next move and the possibility of diplomatic resolution.
Today, investors will watch for key economic data and Fed commentary. S&P Global PMI data for manufacturing, services, and composite is due at 17:45 GST, followed by existing home sales at 18:00. FOMC members Bowman and Williams are also scheduled to speak, potentially offering new policy signals.
Technically, the S&P 500 remains rangebound, trading within a $100 band for 10 sessions. Resistance lies near $6,055, with the 21-day SMA at $5,955 offering support. A breakout above $6,000 could trigger directional momentum. SPX would need to get out of this $100 band to build on a new trend.
- Gold
Gold prices closed on Friday with a doji candle, falling by 0.05% and suggesting uncertainty in the direction. However, Monday’s Asian session showed a 0.45% drop despite a gap-up opening, backed by an increasing US dollar. Despite a weak performance, the yellow metal remains in an ascending channel pattern on the daily chart, supported by the lows of 20th May, 29th May, and 20th June, along with the 21-EMA, suggesting an intact bullish market structure unless prices fall below the $3,340 level.
From a fundamental standpoint, the Middle East region saw a spike in geopolitical tensions after the US attacked nuclear facilities in Iran, with Iran’s government vowing retaliation against military aggression by the US and Israel. The opening on Monday saw gold prices uncharacteristically fall amid demand for safe-haven assets like the dollar. The downside risk for the bullion may be limited if the tensions continue to escalate into a broader conflict. Investors are awaiting today’s PMI figures for fresh insight into US economic health, as these will influence expectations regarding the Federal Reserve’s projected two interest rate cuts this year, a scenario that would benefit non-yielding assets like gold.
