U.S. stock futures opened sharply lower Sunday afternoon, March 1, as global investors reacted to the weekend attacks in the Middle East that killed Iran’s Supreme Leader Ayatollah Ali Khamenei, crippled global energy supply chains and threatened broader conflict.
Geopolitical events are always a potential source of market turmoil, but they rarely have serious, widespread impacts. The weekend skirmishes between the United States, Israel and Iran could be different, some analysts say.
“We expect markets to react more broadly to this weekend’s attacks than to other recent geopolitical events,” TD Securities analysts said in an analysis published March 1. This is because the impacts are broader. The energy supply is interrupted in the short term, even when the possibility of the conflict spreading is looming.
What’s more, stocks were already on the defensive due to fears of AI-caused disruptions and difficulties in private credit markets, Jay Hatfield, CEO and CIO of Infrastructure Capital Advisors, a fund management firm, said in an email exchange with USA TODAY.
Expect investors to sell stocks and buy bonds, Hatfield said. That trading had already begun in the days before the strikes, when investors began pricing in the possibility that the S&P 500 would fall 0.4% on Friday, while the benchmark US 10-year bond would fall five basis points to close below 4%. Bond yields (interest rates) fall when prices rise, and vice versa.
On Sunday, US stock index futures fell about 1% each.
Global investors may also flock to the US dollar, pushing it higher after a period of selling, Goldman Sachs analysts wrote in a March 1 article. Similarly, while U.S. stocks have performed worse than “the rest of the world” so far this year, the S&P 500 is essentially unchanged. Meanwhile, the Vanguard FTSE All-World ex-US Index Fund ETF is up more than 11%, putting the United States in a better position to withstand a prolonged oil price shock.
Analysts are also preparing for oil prices to reach at least $90 a barrel, and possibly higher. Brent crude oil, the global benchmark, was trading at around $80 a barrel around 6 pm ET on March 1.
Gold may be one of the biggest winners of the conflict. The precious metal “could rise as high as $200 an ounce at the open, and silver is likely to rise as well,” TD analysts wrote.
This article originally appeared on USA TODAY: U.S. Stocks Fall, Oil Rises Amid U.S., Israeli Attacks on Iran