Oil hits US$90 on war escalation fear as stocks drop
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STOCKS fell around the globe, bonds rose and oil hit US$90 a barrel on concern that the Israel war with Hamas will escalate into a wider conflict in the Middle East.
The S&P 500 dropped for a fourth straight session. The gauge approached its 200-day moving average, a threshold seen by some chartists as a harbinger of more losses, if crossed.
Wall Street’s “fear gauge” – the VIX – hovered near its highest since March. Treasury 10-year yields pushed away from the 5 per cent mark. Gold rose. Bitcoin briefly topped US$30,000.
Israel’s military said it struck Hamas targets in Gaza overnight and responded to fire from Lebanon by hitting Hezbollah assets.
The US said its military bases in Iraq and Syria are increasingly under attack. Leaders from around the region prepare to gather in Cairo for a summit.
“The ongoing situation in the Middle East has triggered a surge of volatility in the oil and stock markets, compelling investors to re-evaluate their strategies and shift their focus from riskier assets to ‘safer’ investments,” said Fawad Razaqzada, market analyst at City Index and Forex.com.
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The US stock market has been whipped around in recent weeks by rising geopolitical concerns, climbing Treasury yields and growing worries about interest rates staying elevated for longer.
Traders also waded through a raft of corporate earnings.
Of the 86 companies in S&P 500 that have announced results through Friday (Oct 20) morning, 74 per cent beat analysts’ profit estimates, compared with 78 per cent for the whole season a year ago, according to data compiled by Bloomberg.
While the S&P 500’s declines this week have appeared largely orderly, the nearest futures contracts tied to the Cboe Volatility Index – also known as the VIX and a measure of expected swings in America’s benchmark equity gauge – closed Thursday in a pattern known as backwardation.
It is a telltale sign of mounting distress, as traders anticipate more volatility in the near-term than further out in the future. BLOOMBERG
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