Crude prices surge amid geopolitical tensions

Today’s headlines

What’s happening: Crude oil prices gained sharply on Monday amid rising geopolitical concerns.

What happened: Russia’s claims of Ukraine launching an attack on President Vladimir Putin’s residence was a meaningful setback to the peace talks being orchestrated by the US.

Rising tensions in the Middle East also sparked concerns around crude supply disruptions.

Why it matters: Last week, US President Donald Trump said that a “lot of progress” had been made in the peace talks with Ukraine’s President Volodymyr Zelenskyy, although an agreement may still take weeks. Zelenskiy also said that a team from his country would meet with US delegates next week to end the ongoing war with Russia.

On Monday, Russia said that it is now looking to review its position on peace talks after Ukraine launched a drone attack on President Vladimir Putin’s residence in the northern part of the country. Ukraine rejected these claims, adding that Russia was seeking “false justifications” for conducting further strikes.

Meanwhile, Venezuela began shutting down oil wells after a US blockade to financially pressurise the country.

Oil markets also responded to unrest in the Middle East and Iran’s threats of a “full-scale war” with the US, Europe, and Israel, which sparked supply concerns.

China announcing plans to increase fiscal spending next year led to expectations of economic growth and an increase in the demand for oil.

Weakness in the US dollar lent further support to oil prices, as a softer greenback makes commodities cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped to 98.01 this morning.

Spot prices for WTI crude oil edged higher by 0.1% to trade at $57.79 per barrel this morning. Brent crude also rose to $61.27 per barrel this morning. Both standards of crude oil rose sharply on Monday, gaining more than 2% in the session.

What to watch: Investors will continue monitoring the ongoing geopolitical concerns, which are expected to provide further direction to oil prices ahead.

Data on US stockpiles of crude oil and gasoline will also impact oil prices.

The markets today

US stocks in focus today ahead of a basket of major economic reports

Context: US equity markets started the final week of the year on a cautious note with a decline in tech stocks.

Details: Heavyweight tech shares, which recorded gains last week to send the S&P 500 to record highs, declined on Monday. The information technology sector weighed on overall market sentiment, amid a decline in most tech and AI-related stocks. Nvidia’s stock fell 1.2%, while shares of Palantir Technologies lost 2.4%.

Tesla’s shares tanked 3.3% on Monday after surging to a record high last week. Shares of precious metal miners also declined, as silver prices fell sharply after breaching the $80 per ounce level and gold prices tumbled after hitting record highs last week.

Energy stocks bucked the trend, rising around 1% following a sharp increase in oil prices.

The US announced that pending home sales surged by 3.3% in November, accelerating from a 2.4% gain in October. The figure also came ahead of market estimates of a 1% rise. The Dallas Fed’s general business activity index for Texas manufacturing declined 0.5 points to a reading of -10.9 in December, its weakest level since June.

The S&P 500 fell 0.35% to close at 6,905.74, while the Dow Jones index tumbled 249.04 points, or 0.51%, to settle at 48,461.93 on Monday. The Nasdaq 100 dipped 0.46% to close at 25,525.56.

All three major indices are on course to record monthly gains, with the Dow and S&P 500 expected to notch gains for the eighth month in a row.

What to watch: Investors await the release of economic data on S&P/Case-Shiller home price (1800 UAE Time), Chicago PMI (1845 UAE Time) and Dallas Fed services index (1930 UAE Time) today. The S&P CoreLogic Case-Shiller home price index, which surged by 1.4% year-over-year in September, is expected to rise by 1.1% in October.

Analysts expect the Chicago Business Barometer to improve to 39.5 in December from 36.3 in November, while the general business activity index by the Federal Reserve Bank of Dallas is expected to rise to a reading of -2 in December from -2.3 in the previous month.

Other Markets: European indices closed mostly higher on Monday, with the DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.05%, 0.10% and 0.09%, respectively, and the FTSE 100 down by 0.04%.

The news shaping the markets

Russia warned that it would retaliate against Ukraine launching almost 100 drones at one of President Vladimir Putin’s residences. The news sent the USD/RUB pair lower in forex trading this morning.

South Korea’s industrial production climbed 0.6% in November following a 4.2% plunge in October, which exerted pressure on the USD/KRW forex pair.

India’s industrial production surged 6.7% year-over-year in November. This being a significant acceleration from the previous month’s 0.5% growth sent the USD/INR pair lower in forex trading this morning.

Saudi Arabia’s unemployment rate rose to 3.4% in the third quarter from 3.2% in second quarter, lending support to the USD/SAR forex pair.

Hong Kong’s trade deficit rose to $48.5 billion in November from $43.4 billion in the year-ago month, which sent the USD/HKD pair higher in forex trading this morning.

What else to watch today

Spain’s inflation rate (1200 UAE Time), retail sales (1200 UAE Time) and current account (1300 UAE Time), Brazil’s gross debt to GDP (1530 UAE Time), nominal budget balance (1530 UAE Time), unemployment rate (1600 UAE Time) and net payrolls (2130 UAE Time), as well as US Redbook index (1755 UAE Time), FHFA house price index (1800 UAE Time), Dallas Fed services revenues index (1930 UAE Time), 6-week Bill auction (2030 UAE Time), Baker Hughes oil rig count (2200 UAE Time), and Baker Hughes total rigs count (2200 UAE Time).