Markets stabilise as investors fear ‘adverse shock’ from higher oil prices – business live

Shares have jumped higher in New York, and the oil price is sliding faster, following a report that Iran has signalled it wants to de-escalate hostilities with Israel and negotiate.

The Wall Stret Journal is reporting that Iran has been urgently signaling that it seeks an end to hostilities and resumption of talks over its nuclear programs, sending messages to Israel and the United States via Arab intermediaries.

This is pushing equities up on Wall Street, where the S&P 500 share index is now up 69 points or 1.1% at 6,046 points.

Oil has weakened, though – with Brent crude having now fallen by 3.4% today to $71.70 per barrel. That wipes out about half of its jump on Friday.

With a little over an hour’s trading to go, London’s stock market is flirting with a new record high.

The FTSE 100 index of blue-chip shares has now risen to 8881 points, up 0.35% today.

That puts the Footsie just 3 points away from the record closing high of 8,884 points set last week [the alltime intraday high, of 8,908 points, is a little further away].

Over in New York, the stock market has opened higher as geopolitical anxiety appears to ease.

The Dow Jones industrial average has risen by 265 points, or 0.6%, in early trading to 42,463 points.

The broader S&P 500 share index has gained 0.6%.

David Morrison, senior market analyst at fintech and financial services provider Trade Nation, reports that traders have been snapping up shares following the drop in values since Friday morning.

Morrison says:

The selling continued as markets reopened late on Sunday. But traders then bought into the dip, increasing their long side exposure once again. Time will tell if this is short-term opportunism, or a more general uptick in risk appetite.

Hostilities between Israel and Iran continued over the weekend. Despite this, it appears that market participants are less concerned about the possibility of the violence spreading throughout the region than they were last week.

It appears that most of the airstrikes and missiles have avoided the most significant parts of Iran’s energy infrastructure. But there are fears that this could change. In addition, Iran has threatened to disrupt, or even shut down, the Strait of Hormuz, through which around 20% of global oil is transported. But some analysts think that this is unlikely, given that this is an important route for Iranian oil to China, its major customer.

Israel’s government bonds are also rallying today.

Reuters reports that an Israeli bond maturing in 2054 has risen by more than 1% today.

Israel’s currency is on track for its best day against the US dollar since the 2008 financial crisis.

The shekel has gained around 3% today, rising to 3.51 to the dollar, up from 3.61 on Friday.

The shekel had weakened last Friday after Israel launched its attack on Iran, on fears that its economy could be hurt if the conflict escalated.

Analysts also suggested that the clashes could push back the timeline for monetary easing by the Bank of Israel; higher interest rates tend to support a currency.

Oof! Business activity continued to decline in New York State in June, new data shows.

The latest Empire State Manufacturing Survey, just released, indicates that business conditions in the state declined again this month,

Firms reported that new orders and shipments declined, and supply availability worsened – possibly a sign that Donald Trump’s trade war continues to hurt the US economy.

Overall, the Empire State headline general business conditions index fell seven points to -16.0, from -9 in May, weaker than expected.

In brighter news, though, the survey also found that firms have turned optimistic about the outlook, with the future general business conditions index rising above zero for the first time since March.

The survey was conducted between 2 and 9 June, after the US and China agreed their trade war truce in Geneva last month, but before their latest meeting in London last week had concluded.

The Israel-Iran conflict, and its impact on oil prices, looms over central banks such as the Bank of England, which is scheduled to set interest rates on Thursday.

The BoE is expected to leave borrowing costs unchanged this week, with a cut possible at its August or September meetings.

Professor Costas Milas, of the University of Liverpool’s Management School, tells us:

As the war between Israel and Iran continues, the outlook for oil prices is bound to become extremely uncertain. Notice that the Bank of England’s latest (in May) Monetary Policy Report assumes (Brent) oil prices of $64 per barrel for both 2025 and 2026.

This is much lower than today’s oil price of $74.60. If the conflict continues, there are clear, and adverse, implications for (UK) inflation and GDP growth. It looks certain that the MPC will keep interest rates unchanged this week. The next decision is in early August.

Nevertheless, if the war escalates, the MPC can still run an unscheduled meeting in July to deal with potentially hugely adverse effects on inflation and growth.

European natural gas prices have risen today, as the energy markets continue to be influenced by events in the Middle East.

Bloomberg has the details:

Benchmark futures rose as much as 3.4% on Monday to the highest since early April, after jumping 4.8% on Friday. Open hostilities between Israel and Iran entered a fourth day with no sign of easing, stoking fears of a broader conflict in the energy-rich region.

For gas traders, the biggest concern is that a further escalation could disrupt shipments through the Strait of Hormuz, a key waterway for seaborne supplies. While physical delivery of liquefied natural gas doesn’t currently appear to be affected, any interruption would strain the market at a crucial time in Europe’s stockpiling season.

“If the narrow passage is closed, it would have a severe impact on markets,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management in Copenhagen. “We are seeing a growing risk that the market may become concerned about storage levels as winter approaches.”

The dip in the oil price today is lifting shares in some airlines.

IAG, which owns British Airways, are up 2.5% today, with Germany’s Lufthansa up 1.4%.

Encouraging news: Businesses have grown less pessimistic about the world economy’s near-term outlook.

That’s according to Oxford Economics’ June Global Risk Survey, which shows that the de-escalation of tensions between the US and China have lifted growth expectations.

The Risk Survey found that businesses are confident that recession risks have declined. Respondents see less than a 15% chance of global recession this year, compared with more than 25% in April.

However, sentiment remains weaker than earlier in the year, before Donald Trump’s ‘liberation day’ tariff hike announcements at the start of April.

European shares are “surprisingly resilient” today against a backdrop of uncertainty,” says Russ Mould, investment director at AJ Bell.

That resilience has helped to push the major European stock markets higher this morning, as they recover from Friday’s wobble.

Mould points out that despite a weekend of violence between Israel and Iran, investors show no signs of panicking; future prices imply a positive day for Wall Street when US markets open later on.

Mould writes:

“The gold price is often a measure of investor sentiment, going up when people are worried and going down when they’re optimistic. The precious metal slipped 0.6% to $3,432 per ounce which indicates that investors remain alert to ongoing geopolitical tensions but they’re not reaching for their tin hats.

“The Middle East conflict remains a fluid situation and there is the potential for markets to still experience sudden jolts if the tension escalates further.”

But as things stand, the UK’s FTSE 100 index is now up 0.5% or 42 points, at 8,893 – closing in on its alltime high.

Germany’s DAX is 0.3% higher, while France’s CAC has gained 0.7%.

With shares up this morning, and the oil price now down, investors will be pondering how much weight to put on geopolitical issues.

According to a new research note from Deutshe Bank, geopolitics historically onla has a wider market impact when it affects macro variables like growth and inflation.

Deutsche Bank’s Henry Allen writes:

So for markets, the geopolitical events that mattered were the stagflation shocks, like the 1970s oil crises, the Gulf War in 1990, and Russia’s invasion of Ukraine in 2022.

Today, we haven’t seen a shock on that scale so far. Brent crude oil prices are still beneath their 2024 average of around $80/bbl. So this isn’t causing wider inflationary problems yet. Clearly, a larger price spike would evoke the 2022 scenario where central banks hiked rates to clamp down on inflation. But so far at least, we’re yet to see that. If anything, the extent of the market’s resilience to repeated shocks in 2025 has been a significant story in itself.

The risk-off sentiment that gripped financial markets on Friday appears to be fading, even though Israel and Iran have continued to launch attacks at each other.

After rising in early trading, the oil price has now dipped by almost 1% today, with Brent crude back down below $74/barrel. That still leaves it up over 6% since Thursday night, just before Israel launched its attack on Iran.

Achilleas Georgolopoulos, senior market analyst at Trading Point, reports:

Risk appetite appears to be improving slightly today, with the dollar losing a bit of ground, both oil and gold surrendering a decent portion of their recent gains, and bitcoin climbing to the $106k area again. However, this risk-on reaction could quickly reverse, especially if Iran openly threatens to block the Hormuz Straits.