"Clinging to every word": US stocks started the day mixed amid the war

The main US stock indices after yesterday's rally started trading mixed, with minor changes.

The broad index of American shares S&P 500 in the first minutes of trading on March 10, then came out in a small plus, and vice versa - in a small minus. At the time of publication it is losing 0.3%. The same happens with the technological Nasdaq Composite - adding 0.11% - and the blue-chip index Dow Jones (down 0.22%).

Forty minutes after the start of trading, the S&P 500, the Nasdaq Composite, and the Dow Jones briefly went into a small minus: losing 0.42%, 0.23%, and 0.34%, respectively. And then - all also went into a slight plus - amid the news that the G7 countries asked the International Energy Agency to prepare scenarios for the release of "emergency oil reserves".

Meanwhile, Brent prices rose above $91 per barrel (down 7% from the previous close) - at the intraday low they were falling to $88. WTI futures for delivery in April are at $89 per barrel - at the low on March 10 they were down to $84.

The VIX Volatility Index, also known as the "Wall Street Fear Index" is at 24.5 (down 3.65% from the previous close) - at its intraday low, the VIX was down to 22 points, although it had reached 35 the day before - any value above 20 indicates volatility in the market.

Cautious optimism in market participants was inspired by the statements of US President Donald Trump on Monday, March 9. Despite the ongoing hostilities in the Middle East, the head of the United States noted the day before that the war with Iran is close to completion, and the Pentagon's campaign in the Middle East is significantly ahead of schedule. Meanwhile, the Islamic Revolutionary Guard Corps said the blockade on oil exports from the Middle East region will continue until the U.S. and Israeli attacks on Iran stop. And hardliners continue to rally in Iran around the country's new supreme leader, Mojtaba Khamenei, son of assassinated Ayatollah Ali Khamenei, Reuters writes.

"The sharp reaction [of investors] to Trump's statements highlights how much markets are literally clinging to his every word," said City Index senior market analyst Fiona Cincotta (quoted by Reuters). "Markets remain volatile because they are still heavily influenced by news headlines. And that obviously means that any commentary can push the market one way or the other," she added.

"The events of the night [Trump's statements about a possible imminent end to the war - OnInvest] are fueling markets' desire to see a signal that escalation has peaked before closing or winding down so-called 'war deals'," Barron's quoted Kyle Rodd, senior financial markets analyst at Capital.com, as saying. According to him, the key to calming markets will be confirmation that oil is once again flowing freely through the Strait of Hormuz, the Middle East region's energy infrastructure is safe, and the Gulf states are returning to energy production at previous levels.

Paul Gooden, head of global natural resources at Ninety One Investment Company, believes that oil prices could exceed $120 per barrel if market disruptions are prolonged. His opinion is quoted by CNBC. "Oil prices could continue to rise until higher costs begin to curb demand," he said. "At that point, consumers and businesses change behavior: driving cars less, flying less often or switching to alternative energy sources. This process of 'demand destruction' has historically acted as a natural limit for long price spikes," the expert added.

Since the beginning of the conflict with Iran, the yield on two-year U.S. Treasury bonds has largely moved in line with oil prices, said analysts at Bank of America, whose opinion is cited by MarketWatch. However, such dynamics can be erroneous, they believe. Markets seem to be "haunted by the specter of 2022," Bank of America analysts said. Back then, the Federal Reserve fought a surge in inflation by raising interest rates after pandemic-induced supply chain disruptions. However, the situation now is different from 2022: "We have a weaker labor market, moderately elevated inflation and more modest fiscal support," BofA analysts pointed out. "This sets the stage for a softer Fed response if the oil shock proves persistent," the analysts said. In other words, the U.S. central bank may be more inclined to cut interest rates, MarketWatch explained.

This article was AI-translated and verified by a human editor