Israel spared oil and nuclear facilities in its air strikes on Iranian military targets Saturday, easing investor concerns about the extent of Israel’s retaliation to Tehran’s October 1 missile barrage.
“Investors breathed a sigh of relief as the attack was more restrained than expected,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Oil prices have swung wildly in recent weeks, with investors concerned that an attack on Iran’s oil facilities would not only take Iranian crude off the market but spur a wider conflict involving other regional oil producers.
Brent North Sea crude, the international benchmark oil contract, fell as much as six percent on Monday with prices hovering just above $71 per barrel.
“Israel’s strike, carefully avoiding energy sites, has softened fears of a full-scale conflict with Iran,” said Stephen Innes, analyst at SPI Asset Management.”Even more telling is Iran’s response, downplaying the attack’s impact and signaling that its warnings may have deterred any more aggressive action from Israel,” he added.Concerns in the oil market have now shifted back to focus on potential oversupply in 2025 and a slowdown in demand from China, the world’s largest oil importer, according to analysts.
US stocks were higher at midday, boosted by the cheaper oil, and as investors look ahead to a busy week of economic indicators that could set the direction for a market that is already hovering near record highs.
On Wednesday comes the first estimate of third-quarter US GDP, and on Thursday the Federal Reserve’s preferred inflation gauge will be reported. Finally, Friday sees the release of key US monthly jobs figures.
Together, the reports should provide clues on the Fed’s interest rate policy for the rest of the year.
“The market has got used to a strong US economy, and better than expected economic data, thus we could see a volatile reaction to the US payrolls data later this week” if they are less rosy than previous months, said Kathleen Brooks, research director at XTB.
It’s also a big week for US company earnings as five of the “Magnificent Seven” tech stocks will report third-quarter results, including Alphabet (Google), Amazon, Apple, Meta (Facebook) and Microsoft.
“The market expects the US tech giants to continue to report double digit earnings growth for the next five quarters, so there are some big expectations for these companies,” said Brooks.
London, Paris, and Frankfurt all closed higher. London was hit at both ends by the falling crude prices. Oil and gas giants BP and Shell were among the biggest fallers.
But airlines easyJet and British Airways-owner IAG led gains on the prospect of lower fuel prices.
Dutch medical device maker Philips lowered its full year sales target Monday blaming a deterioration in demand from China, with its share price dropping almost 17 percent in Amsterdam, making the stock exchange’s AEX index one of the few to fall Monday.
On currency markets the yen hit a three-month low, sliding more than one percent against the dollar as Sunday’s general election resulted in a hung parliament.
But that helped the Tokyo stock market close up 1.8 percent as the yen’s weakness boosted shares of exporters.