Asian Pacific airline stocks tumble

US stock index futures tumbled as they reopened after Friday’s close. The losses were broad-based, although the NASDAQ and Russell 2000 had taken the brunt of the selling in early trade. A look at individual stocks in the pre-market showed hefty losses across the tech giants, with semiconductors and ‘Mag 7’ lower across the board.

In fact, the only tech major in positive territory was Palantir, which was up 4%, as investors bet on an increased defence role for the tech company. US small caps were also hit hard, no doubt as these had outperformed over the last few months thanks to the large dollop of froth that needed a home, having been blown off tech. This morning’s selloff came against a sifter backdrop for US equities.

Last week brought losses of 1% or more for the NASDAQ, Dow and Russell. The S&P 500 got away with a 0.4% slip for the week. Investors were already busy trimming back their stock market exposure due to concerns over AI. These included worries about corporate AI spending pledges amongst the market leaders, as well as the return on investment.

But other sectors also suffered, such as software, banking, exchanges and insurance, on fears that AI could replace much within the Services sector.

Today’s selloff was, of course, a response to the US-Israeli attack on Iran. Where equities go next will depend to some extent on how long hostilities last. As things stand, it seems unlikely that this will all be over in a couple of weeks, unlike the last joint operation against Tehran.

And it’s clear that Iran is not going to roll over this time. But what investors can’t know yet is just how much damage has been done to the regime, or its ability to fight back effectively. But it’s worth noting that, as yet, there have been no significant technical breaks to the downside.

While the S&P 500 futures did drop under the 6,775 low made two weeks ago, it would take a protracted break of 6,730 to really shake things up. In the meantime, a bit of positive news could encourage dip buyers to reemerge. If they come back in force, they could drive a strong rally, which could take the S&P back up to resistance at 7,000. Stranger things have happened.

Source: TN Trader

Last week, Producer Prices came in above expectations, which, as with Core PCE the previous week, suggests that inflation remains an issue. The CME’s FedWatch Tool now suggests that the next 25 basis point rate cut will come in July, or even September, rather than June. But several Fed members have suggested that their next move may be a hike rather than a cut. Non-Farm Payrolls are released this Friday.

European stock indices fell sharply this morning. There were losses in excess of 2% for the Euro Stoxx 50, German DAX and French CAC. The UK’s FTSE 100 was down 1.5% by lunchtime. The banking sector took a hit as investors trimmed their exposure on concerns of drawn-out hostilities across the Middle East.

Source: TN Trader

Iran has responded to Saturday’s attacks from the US and Israel by launching missiles and drones against near-neighbours, with the UAE, Bahrain, Saudi Arabia, Kuwait and Qatar all in the firing line. Investors also cut back on tech and airlines. As with Asian Pacific equities, energy was a bright spot as oil and natural gas rallied.

The US dollar shot higher overnight in a move which saw the Dollar Index hit a five-week high. The move was a strong indication that the US dollar remains the go-to safe-haven currency for investors, and that those calling for further weakness due to de-dollarisation may be a bit early.

Source: TN Trader

US Treasuries also found a bid, with the yield on the key 10-year breaking back below 4.0% for the first time since October last year. Yields dropped back to an eleven-month low of around 3.92% before bouncing.

However, upside momentum in the dollar may be constrained by stagflation concerns. Friday’s hotter-than-expected US Producer Price Index revived fears of sticky inflation even as growth shows signs of slowing. This creates a difficult policy dilemma for the Federal Reserve, which risks reigniting inflation if it cuts rates too soon or further slowing the economy if it holds policy tight.

Unsurprisingly, Fed Governor Stephen Miran called for significant rate cuts, arguing for 100 basis points in 2026, as underlying price pressures remain subdued. Traders will now look ahead to the US ISM Manufacturing PMI, ADP employment data and Friday’s Nonfarm Payrolls report for further direction.

Gold hit its highest level since late January in early European trade, with the bulls attempting to build momentum beyond the $5,400 level. That has failed so far, although traders are following every news update concerning the ongoing hostilities across the Middle East. This included reports that Iran’s Islamic Revolutionary Guard Corps Navy has announced the closure of the Strait of Hormuz.

Source: TN Trader

Last week, sticky US inflation data and slowing growth bolstered support for the non-yielding metal, although a firmer dollar could help to cap gains in the near term. Traders are watching this week’s ISM data and the US jobs report, though geopolitical headlines are likely to remain the dominant driver.

Silver has had another volatile session. It briefly broke below $92 per ounce before it rallied above $96.50.

Source: TN Trader

Crude oil prices gapped higher on Sunday night as they reopened after the weekend. Investors scrambled to cover shorts and get long after the joint US-Israeli attacks on Iran on Saturday, which led to the death of Supreme Leader Ayatollah Ali Khamenei and several of his key officials. Iran has responded, launching missiles across the region with attacks on Israel, Dubai, Bahrain and Qatar, amongst others.

Front-month WTI soared 10% in early trade, coming within sight of $75 per barrel. It then pulled back sharply over the next two hours, before steadying above $69. From there, it pushed higher again before profit-taking came in around $73. Is this a knee-jerk overreaction to the attack, or a sensible response to the US-Israeli action which puts the whole of the Middle East, and potentially the rest of the world, in danger?

Source: TN Trader

As far as traders are concerned, the Strait of Hormuz is key, as this is a potential chokehold for the delivery of around 20% of the world’s crude oil and natural gas from producers to consumers.

If Iran manages to blockade the Strait or disrupt traffic through it for any length of time, then oil prices may rally further. But should any disruption prove short-lived, then prices could easily reverse and fill the chart gap made on Sunday.

It’s no secret that President Trump wants low oil prices, as these not only affect the price of a gallon of gas but also help to temper inflation. If the Iran issue is contained, then, over the long term, lower oil prices could result. But should this turn out to be a drawn-out military engagement, then all bets are off.

It’s hardly worth mentioning, but on Sunday, OPEC+ agreed to a production increase of 206,000 barrels per day for April. This was its first increase in three months, and slightly above expectations of a 137,000 barrels per day rise. It does send a signal suggesting that producers have the capacity to increase output should there be problems with supply.

Despite the significant ‘risk-off’ move from investors in the wake of Saturday’s US-Israeli attack on Iran, Bitcoin showed relative resilience. In fact, it rallied initially and has so far only given back a small proportion of Saturday’s gains. There’s evidence of some support coming in around $63,000, although a protracted break below $60,000 could put a serious dent in investor confidence.

Nevertheless, Bitcoin’s resilience was quite impressive, and it does raise speculation that it may finally be bottoming after its 50% collapse from October’s high. Of course, this could prove to be a false dawn. But Bitcoin’s relative stability has renewed the “digital gold” narrative, as it behaves less like a high-beta tech asset and more like a store of value amid geopolitical stress.

The March VIX gapped up towards 23 overnight before pulling back a touch. Traders remain alert to the potential for an escalation in Middle Eastern hostilities. With energy markets on edge, key US data releases ahead, and geopolitical uncertainty intensifying, volatility could rise quickly if headlines deteriorate further.

For now, markets appear to be adjusting through sector rotation and selective safe-haven flows rather than broad-based panic selling.

Markets enter the week navigating a sharp geopolitical shock layered on top of an already fragile macro backdrop. The coordinated attack by the United States and Israel on Iran has triggered a surge in oil prices, a rally in the US dollar and gold, while exerting downward pressure on global equities.

With risks surrounding the possibility of a blockade of the Strait of Hormuz, with tankers already unable to navigate the route, energy markets remain the key transmission channel into broader inflation expectations and risk sentiment. At the same time, investors must contend with a heavy US data calendar, including ISM Manufacturing, ADP employment and Friday’s Non-Farm Payroll report.

Sticky inflation concerns following the recent Producer Price Index release complicate the Federal Reserve’s policy path, limiting the scope for rate-cut optimism. Direction this week will likely hinge on whether geopolitical tensions stabilise or intensify, with oil, the US dollar and safe-haven flows setting the tone for global markets.