US futures turn sharply negative, following European stocks lower, as Iran threatens the Strait of Hormuz
Oil and gas are again at the heart of the matter, as conflict in the Middle East continues.
After a volatile trading session yesterday — in which US stocks ended up very marginally in the green after a premarket session which looked decidedly negative — traders are once again selling risk assets, as the war in Iran continues into its fourth day and the conflict spreads further across the Middle East.
Energy continued to be the focal point for global investors, with crude oil (WTI) climbing to over $75 per barrel in early trading on Tuesday, now up more than 16% from the undisturbed price on February 27th. European gas prices spiked even more sharply, with natural gas prices (front-month contracts) soaring north of €60/MWh, up more than 90% since the US and Israel launched their attacks.
The fresh concern in oil markets came after an Iranian official said his country would “set fire to anyone who tries to pass through” the critical Strait of Hormuz, a critical juncture through which roughly 20% of the world's global petroleum liquids passes in any given year. For natural gas, meanwhile, the latest catalyst is a production halt at the world's largest LNG (liquefied natural gas) facility in Qatar, reportedly following an Iranian drone strike.
Elsewhere, the US embassy in Riyadh, the capital of Saudi Arabia, has also been hit by a drone strike, while Secretary of State Marco Rubio warned last night that the “hardest hits are yet to come,” as joint US-Israel forces continue attacks on Tehran. S&P 500 futures are down 1.8% this morning as the conflict continues.
For single stocks, there are few real winners outside of the energy space, with higher-beta names looking very likely to open down a few points. Accordingly, tech stocks look likely to fare worse than the wider market, with futures on the Nasdaq 100 down 2.5% at the time of writing. The AI trade looks unlikely to be exempt, with darlings like Nvidia, Micron, and Alphabet all down more than 3% premarket. Even Palantir, which yesterday rallied nearly 6% on ties to America's defense complex, is off some 4%.
For most, the impact is primarily a second-order effect of a broad sell-off in risk assets. However, at least one tech giant has been directly impacted: Amazon is down 2.8% as of 6:15 a.m. ET, after the company said yesterday that drone strikes damaged three of its data centers in the region, with two in the United Arab Emirates “directly struck.”
