Global oil prices soared overnight, with U.S. stock indexes opening higher following a weekend of Iran-backed Houthi militants launching ballistic missiles at Israel and 3,500 extra U.S. troops arriving in the Middle East after one month of conflict.
The global benchmark, Brent crude oil, surged 2.7% to almost $116 a barrel, the highest level since the conflict began. U.S. West Texas Intermediate crude also climbed 2.2% to around $102 a barrel.
Despite the spike in oil prices, all three major U.S. stock indexes kicked off the trading day on a positive note after significant losses at the end of last week.
While some traders believed the sell-off prompted by the war had hit a low point for now, investors also increased their purchases of U.S. government bonds due to concerns about an economic slowdown. This may have helped support stocks, as traders now foresee slightly lower interest rates from the Federal Reserve.
Traders may also have been somewhat reassured by President Donald Trump’s latest comments, where he mentioned that the U.S. “will make a deal” with Iran, stating that negotiations are progressing well. Trump expressed optimism about potentially reaching a deal “soon.”
In addition, Trump claimed that Iran had already given the U.S. most of a 15-point plan aimed at ending the war, and that 20 boatloads of oil would be passing through the Strait of Hormuz as a gesture of respect.
Looking ahead, some investors are beginning to question Trump’s ability to instill confidence in financial markets without substantial progress on the ground.
Furthermore, U.S. gasoline prices hit $3.99 a gallon, the highest since the summer of 2022. Reports suggest that oil prices could potentially surge to $200 a barrel, reflecting the ongoing repercussions of the largest oil shock in decades.
Patrick De Haan, Gas Buddy’s chief analyst, estimates that American drivers will have spent an extra $10 billion on gasoline since the conflict began just one month ago.
