Dow, S&P 500, Nasdaq sink while oil prices jump as Iran attacks jolt markets

Large-cap energy (XLE) opened with a 3.5% gain, which has faded to 1% in the opening minutes.

To the downside, consumer discretionary (XLY), materials (XLB), financials (XLF), and communication services (XLC) are all off 1% or more.

Meanwhile, the S&P 500 index (^GSPC) itself opened with a 1% loss right around the big 6,800 level — but it’s now rebounded. This is the fourth test of 6,800 this year and is one to watch into the close.

The sideways trading ranges in the S&P and the Nasdaq (^IXIC) have been frustrating the bulls and the bears since late last year.

The major US stock indexes careened into the red at the opening bell on Monday as investors fled to safe-haven assets. The tumble comes as the US-Iran conflict continues to broaden out, engulfing an increasingly large part of the Middle East.

The Dow Jones Industrial Average (^DJI) fell by 1.1%, or just over 500 points. Meanwhile, the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) sank 0.9% and 0.8%, respectively.

Oil prices surged on Monday, as Brent crude (BZ=F) jumped by as much as 13% to top $82 a barrel before slightly paring back gains. West Texas Intermediate futures (CL=F) changed hands just below $73, up around 8%. While Iran is OPEC’s fourth-largest producer, markets are also bracing for sustained disruption in the key Strait of Hormuz, where tanker traffic is at a standstill.

In Europe, gas futures (TTF=F) — heavily exposed to disruption to gas flows through the Strait of Hormuz — exploded higher by more than 45%.

The dollar (DX-Y.NYB) and gold futures (GC=F) are both bid as we await the opening bell for stocks — a reminder that cash and bullion can rally together when investors scramble for safe havens.

Besides gold (and silver to a limited extent), crude oil is also surging. WTI (CL=F) is ripping on obvious supply-risk fears tied to geopolitics, and it’s dragging energy stocks higher even as most sectors are set to open in the red.

The twist: long-term US Treasurys yields (^TNX, ^TYX) are spiking as bonds are getting dumped, not bought. That’s as investors demand extra yield for longer-term risk (what’s called the term premium) — plus systematic strategies dialing down longer-term (duration) exposure as volatility rises.

Geopolitical shocks often fade fast in markets, but some linger. Watch the Cboe Volatility Index (^VIX) above 20 as a gauge of institutional hedging demand (read: skittishness).

Norwegian Cruise Line Holdings Ltd. (NCLH) stock fell 7% before the bell on Monday. The cruise line released its fourth quarter earnings, and despite beating analyst estimates, the group’s stock fell as investors worried about the rise of oil prices driving up fuel costs. Royal Caribbean (RCL) shares also fell 5% during premarket hours today.

Berkshire Hathaway’s (BRK-B) stock fell 1% during premarket hours following the release of its fourth quarter earnings on Saturday. Berkshire’s operating profit after taxes fell 30% from a year ago.

American Airlines’ (AAL) stock fell 5% before the bell on Monday, as the rise in oil prices caused worry among investors that fuel costs would increase.

Gold futures (GC=F) rose on Monday, trading above $5,400 per ounce as the ongoing conflict in the Middle East caused investors to move toward safe-haven assets.

Yahoo Finance’s Ines Ferré reports:

Read more here.

The dollar (DX=F) rose against other currencies as high oil prices led investors to think the Federal Reserve won’t cut rates soon.

Bloomberg News reports:

Read more here.

Tesla (TSLA) gained market share again in France and Norway in February, according to official data, in a sign of stabilization in Europe after two years of declining sales. Tesla stock fell 2% before the bell on Monday.

Reuters reports:

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Airline, hotel, and defense stocks began to react to the Iran conflict on Monday during premarket hours. Lockheed Martin (LMT) shares rose 7% before the bell on Monday, alongside RTX (RTX). BAE Systems’ (BA.L) London shares were up 5%.

Energy companies also saw their stocks jump, with New Fortress Energy (NFE) shares rising 15% in premarket trading. Oil major Equinor ASA (EQNR) rose 4%.

Bloomberg News reports:

Read more here.

Gold (GC=F) prices catching a strong bid this morning to over $5,400 an ounce.

Helpful chart from JPMorgan showing how gold prices have reacted around prior Middle East conflicts:

The JPMorgan team sees upside potential for oil (CL=F, BZ=F) prices to $120 a barrel if the war spreads throughout the Middle East:

No surprise here, some of the most visited ticker pages on Yahoo Finance this morning include Exxon Mobil (XOM), Lockheed Martin (LMT), Chevron (CVX) and Occidental Petroleum (OXY).

You can check out the full list of names here.

Some helpful charts from EvercoreISI on the exposures for the oil majors.

Oil (CL=F, BZ=F) prices have surged this morning post the launch of the US attacks on Iran.

Goldman thinks a good deal of upside may be left for prices:

How Goldman is thinking about the markets in the wake of the US attacks against Iran:

President Trump said on Sunday that the bombing against Iran will continue for several weeks and called for Tehran’s leaders to surrender. But Iran’s security chief said it has no intention of negotiating with the US.

Blasts continued across Bahrain, Kuwait, the United Arab Emirates, and Qatar, as the Gulf states intercepted missiles launched by Iran in retaliation for the US-Israeli strikes, showing the war is spreading beyond Iran’s borders. The conflict has entered its third day since US-Israeli forces began airstrikes against Iran over the weekend.

Trump is calling on Iran’s leaders to hand power to the nation’s people, and The Atlantic said Trump has agreed to speak with Iran’s new leadership.

Bloomberg News reports:

Read more here.