West Texas Intermediate gained 1.5% to $62.96 a barrel. It’s not clear that Israeli leaders had made a final decision to carry out the strikes, CNN said, citing unnamed officials. Contracts for the S&P 500 and the Nasdaq 100 were down 0.1%, paring most of their losses earlier in the day. The Swiss franc and the yen, traditional safe haven assets, inched higher.
Benchmarks in Australia, South Korea and Japan all climbed, pushing a gauge of Asian shares 0.4% higher in early trade.
Geopolitical tensions may add headwinds to the markets, which had calmed recently after a month of turmoil from the tariff blitz unleashed by US President Donald Trump. Investors are scouring charts for clues on whether the advances in stocks can persist, with the S&P 500 near levels that some technicians view as a sign of overheating after a six-day run put the index on the verge of a bull market.
“There is little question that the momentum in the equity market is quite strong. That said, the market is getting overbought near-term, so it could see a breather at any time,” said Matt Maley at Miller Tabak. “However, unless that breather turns out to be a serious reversal, a retest of those all-time highs soon is very possible.”
Oil prices have been volatile since last week on mixed headlines about the fate of Iran-US talks, which may pave the way for more barrels to return to a market that’s expected to be oversupplied later in the year. An attack by Israel would hinder any progress in those negotiations and add to volatility in the Middle East, which supplies about a third of the world’s oil.The tensions boosted demand for haven assets in early Asian trading, sending a gauge of the dollar lower.“The US dollar has of course lost its luster as the undisputed safe reserve asset,” said Richard Franulovich, head of FX strategy at Westpac Banking Corp. As such, “these periodic geopolitical flare ups are going to show up more forcefully in alternatives like the yen and Swiss franc going forward”
Meanwhile, Federal Reserve Bank of St. Louis President Alberto Musalem said tariffs will likely weigh on the US economy and weaken the labor market. Musalem said the Fed can deliver a “balanced response” to both inflation and employment as long as Americans’ outlook on future prices remains anchored at the central bank’s 2% target.
Long-term Treasury yields climbed Tuesday as fractious US budget negotiations kept focus on the growth in deficit spending, with traders piling into bets that they will surge further. Trump is growing frustrated with demands to significantly boost the cap on the state and local tax deduction, according to a senior administration official, signaling a deadlock as Republicans aim to quickly pass a giant tax-cut bill.
