US naval blockade against Iran sends oil prices sharply higher

Commodity markets: Brent and WTI post strong gains

The announcement was immediately reflected on the commodity markets. The price of the global benchmark grade rose by just under nine percent. A barrel (159 liters) of the North Sea Brent crude for delivery in September last cost 82.75 US dollars. US oil WTI became 1.6 percent more expensive at 79.37 dollars per barrel. Even though the Brent grade thus remains well below the highs seen at the beginning of the conflict – at one point a barrel of the benchmark Brent grade had cost somewhat more than 126 dollars – the move heightened concerns about supply bottlenecks at the Strait of Hormuz. Oil prices significantly extended their already substantial gains as Monday progressed.

Equity markets presented a mixed picture. The Dow Jones closed 0.3 percent lower at 52,499 points, while the Nasdaq lost 1.6 percent to 25,873 points. Semiconductor stocks in particular came under pressure: shares of SanDisk, Marvell Technology, and Intel fell between 6.1 and 12.6 percent. In Asia, Japan's Nikkei lost 0.6 percent and South Korea's Kospi dropped 1.9 percent. Germany's leading index DAX, by contrast, closed 0.2 percent higher at 25,114 points, thus trading slightly above its 21-day line.

Equity markets caught between rate concerns and quarterly reports

Market analyst Andreas Lipkow of CMC Markets attributed the DAX recovery to the behavior of risk-tolerant investors. Bargain hunters bought the DAX back above the 25,000-point mark. Buyers are currently disregarding the potential consequences of the recent escalation in the Middle East. Chris Weston, head of research at Pepperstone, simultaneously warned of the macroeconomic implications. The prospect of tighter monetary policy combined with an energy price shock is rarely a good environment for risk assets such as equities.

Fed Governor Christopher Waller had recently suggested that interest rate hikes could be possible in the near future. According to LSEG data, the markets are pricing in at least one 25-basis-point rate move by year-end. For companies, the upcoming reporting season is considered a sentiment test. Today, the major US banks Bank of America, Citigroup, Goldman Sachs, JPMorgan, and Wells Fargo are due to release their quarterly results. According to LSEG analyst estimates, S&P 500 companies are expected to report earnings growth of 23.7 percent year-over-year in the second quarter.

Paramount-Warner deal under fire

Also in focus is the announced multi-billion-dollar deal between Paramount and Warner Bros., which is being sued by twelve US states. California's Attorney General Rob Bonta criticized the takeover on the grounds that it would lead to higher prices and a reduced selection of films and series. According to the Wall Street Journal, the deal had previously been approved by the leadership of the responsible ministry before specialist lawyers could issue a recommendation. The US government had previously cleared the multi-billion-dollar takeover without conditions.

Hapag-Lloyd raises full-year guidance

Among the beneficiaries of the strained situation is German container shipping. Hamburg-based Hapag-Lloyd, the largest German container shipping line, raised its full-year guidance and now expects operating earnings (EBIT) between 0.1 and 1.0 billion euros, compared with a previous corridor of minus 1.3 to 0.4 billion euros. The company cited higher transport prices and recently strong demand as the reasons. The stock rose by four percent in Tradegate after-hours trading.

In addition, Kevin Warsh, chairman of the US Federal Reserve, is set to appear today for his first semi-annual congressional hearing. His statements on monetary policy and his assessment of energy price developments are regarded as an important marker for further market sentiment.

Overall, the trading day underscores how closely geopolitical risks, monetary policy, and corporate earnings are currently intertwined. While energy and shipping stocks benefit from the new situation, technology and rate-sensitive names remain vulnerable.