- U.S. stock index futures on Friday are down between -0.6% and -1%, which appears to be a relatively muted reaction to today’s escalation of the conflict between Israel and Iran in the Middle East. Tesla rises 3.5% as US plans to change automated vehicle regulations; Nvidia is down almost 2%
- Iran’s response to Israel’s attack—which reportedly killed dozens of key commanders and scientists and significantly damaged critical infrastructure, including the nuclear facility in Natanz—has been notably restrained. This leads markets to conclude that a full-scale retaliation may ultimately not occur, even though Israeli Prime Minister Netanyahu stated in an interview that Israel is preparing for war. Also, Iran commented that it will respond to Israeli attack.
- Oil prices fell from $78 to $73 but are attempting to rebound, breaking out from a potential ascending triangle formation. The market will need to remain cautious heading into the weekend, during which “a lot could happen.” Meanwhile, wheat prices are up nearly 3%, rebounding from four-week lows.
U.S. University of Michigan (UoM) data came in well above forecasts. Consumer sentiment is improving, while inflation expectations dropped in the preliminary June reading.
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UoM Consumer Sentiment Index for June: 60.5 (expected: 53.6; previous: 52.2)
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1-Year Inflation Expectations: 5.1% (expected: 6.4%; previous: 6.6%)
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5-Year Inflation Expectations: 4.1% (expected: 4.1%; previous: 4.2%)
- Gold benefited from heightened geopolitical tensions, rising above $3,400 per ounce. At the same time, platinum fell by over 5%, and sentiment in the broader metals market remains weak.
- Cryptocurrency market sentiment reflects risk aversion. Bitcoin rose from around $103,000 to approximately $105,000, but increased selling activity is being observed in both BTC and smaller altcoins.
- Donald Trump stated that Israel’s attack on Iran might encourage Tehran to sign a nuclear deal with the U.S., adding that after the strikes, “he is not sure if Iran’s nuclear program can even continue at this point.” The U.S. President possibly speak with Iranian leadership on Sunday.
- European indexes mostly closed lower. Germany’s DAX dropped more than 1%, while the UK’s FTSE lost 0.4%. German HICP inflation rose by 2.1% year-over-year, in line with estimates and slightly down from 2.2% previously. The monthly inflation reading came in at 0.2% m/m, matching expectations but below the previous 0.5% m/m.
It appears that unless Iran's military prepares a decisive and escalatory response, markets may remain calm with regard to oil supply stability. OPEC stated today that the oil market remains stable—especially if Israel refrains from targeting Iranian oil infrastructure. On the other hand, war may bring unexpected scenario to the markets, with possible Israeli attack on Iranian oil facilities, which would impact the oil market, fuelling 'risk-off' sentiments in military escalation scenario.
