Macro update
Middle East conflict fuels market volatility:
Escalating tensions between the US-Israel alliance and Iran have heightened fears of supply disruptions in the Strait of Hormuz, prompting a shift toward defensive assets.
Oil surges on supply disruption fears:
Brent crude oil and US crude oil are on course for their largest weekly gains since 2022, rising about 16 – 19% as tanker traffic in the region faces disruption.
Global equities under pressure:
Wall Street finished lower with the Dow Jones down 1.6%, while Asian markets are heading for their sharpest weekly decline in six years as investors reduce risk exposure.
Energy spike reshapes rate expectations:
The jump in oil prices has dampened prospects for interest rate cuts, with markets now pricing roughly 40 basis points of Federal Reserve (Fed) easing this year.
Dollar strengthens on safe-haven demand:
The US currency is on track for its biggest weekly rise in more than a year as investors move into defensive holdings amid geopolitical uncertainty.
Asset moves diverge:
Energy stocks have gained on higher oil prices, technology shares found support from AI optimism, while airlines and other fuel-sensitive sectors came under pressure.
S&P 500 recovers from support
The S&P 500 has once again revisited its late January to early February lows around which it managed to find support at 6771 on Thursday. As long as it holds, Wednesday’s high at 6886 may be revisited and perhaps also Monday’s 6901 high.
A slip through 6771 would likely put the mid-December and this week’s low at 6721 – 6711 on the map.
Short-term outlook:
Neutral while below Wednesday’s 6886 high, if overcome, we would turn bullish.
Medium-term outlook:
Neutral while above the 6711 current March low but below the 7002 January peak.
