US stocks ended the week in negative territory amid escalation in the Middle East

U.S. stocks ended the week in the negative after escalating tensions in the Middle East. On June 13, Iran responded with missile strikes to Israeli shelling that began the night before. Against the backdrop of growing geopolitical uncertainty, traders before the weekend preferred to leave risky assets, having moved into gold, oil and defense companies.  

- The S&P 500 broad market index ended trading on June 13 down 1.1%, closing at 5,977 points. The index on Friday offset all of this week's gains, noted Bloomberg.

- The Nasdaq Composite index fell 1.3 percent to 19,407 points.

- The blue-chip index Dow Jones Industrial Average sagged 1.8% to 42,198 points.

- The Russell 2000 Small Company Index lost 1.85% for the day and closed at 2,100 points.

- Oil futures rose sharply, with contracts for Brent for August delivery adding 7.7% and WTI for July delivery jumping 7.6% to the highest price since late January. 

 - COMEX gold rose 1.5% to $3452.6 an ounce, its highest in nearly two months.

- Treasuries fell as higher oil prices added to fears of renewed inflation and the dollar rose slightly, Bloomberg writes.

Shares of Nvidia and other companies leading the market's recovery from April's decline came under pressure as investors shrugged off risky assets, noted CNBC. 

Shares of airlines and tour operators also declined: American Airlines, United Airlines and Delta Airlines lost more than 4% on average. Shares of Turkish and Arab carriers were hit harder, falling 7-10%. Higher oil prices are likely to raise concerns about higher fuel costs for airlines, which incur additional costs by flying around closed airspaces, explains Bloomberg.

But securities of oil and defense companies rose in price: shares of Exxon added 2%, and shares of arms developers Lockheed Martin and RTX jumped by more than 3%.

The market decline began as early as Thursday night, following Israel's first military action. On Friday, selling intensified after the Israel Defense Forces reported the launch of Iranian missiles. Iranian state television reported that the country was refusing to participate in the sixth round of nuclear talks with the U.S. scheduled for this weekend.

Mutual strikes between Israel and Iran have reversed the optimism of the outgoing week. On Friday, the University of Michigan's Consumer Sentiment Index was published: it showed an increase to 60.5 points in June, well above the Dow Jones forecast of 54 points and up 15.9% from a month earlier. Also this week, the US and China made progress in trade talks. However, the jump in oil is again raising questions about supply-side pressure on prices, which could complicate the Fed's interest rate trajectory, Bloomberg states.

At the end of the week, the S&P 500 lost 0.4%, the Nasdaq was down 0.6% and the Dow sagged 1.3%.

«There could be long-term implications of rising oil prices. If prices don't bounce back soon, it will surely affect inflation statistics,» said Bloomberg chief investment officer of Navellier & Associates Louis Navellier.

«This conflict adds new problems to an already considerable list of market worries - and they aren't going anywhere. The least we should expect is that a spike in oil prices, if sustained, will have an almost immediate impact on inflation,» said Siebert Financial investment director Mark Malek to CNBC.

«The main uncertainty remains oil prices: a sustained rise in the cost of oil - especially against a backdrop of already existing geopolitical instability - could be an additional headwind for the economy,» noted Plante Moran Financial Advisors investment director Jim Baird. - The events of the last day reinforce that risk, but a sustained rise in oil prices doesn't look like the base case scenario just yet.»

Barclays strategists, in a note cited by Bloomberg, advised clients to prepare for a «hawkish surprise» from the Fed: they predict the regulator will raise its 2025 inflation forecast next week and reduce the number of expected rate cuts to below current market expectations.

Andrew Brenner of NatAlliance Securities reminded that on the day after the Fed meeting the stock and bond markets in the U.S. will be closed because of the holiday. Given the rising tensions in the Middle East, the week promises to be «challenging,» he noted in a conversation with Bloomberg.