Oil surges over 3% on elevated Middle East tensions

Today’s headlines

What’s happening: Crude oil prices traded higher this morning amid renewed tensions in the Middle East.

What happened: Spot oil prices climbed more than 3% this morning on eroding hopes of the Strait of Hormuz being reopened soon.

Crude soared on elevated supply concerns after Israel launched strikes on Lebanon.

Why it matters: Israel and Lebanon had agreed to a ceasefire on June 3 after negotiations in the US. Despite this, hostilities have continued.

Last week, US President Donald Trump has indicated that Washington and Tehran were close to signing a “very good deal”. Iran had said it would pursue a diplomatic engagement with the US if Israel stopped its offensive.

Amid hopes of a de-escalation in tensions between the US and Iran, Israel launched renewed strikes on Lebanon.

Iran retaliated with missile strikes aimed at Israel. Although Trump urged Israel to not respond, the Israeli Air Force said it carried out strikes on military targets in western and central Iran.

At a meeting on Sunday, OPEC+ members agreed to increase their production targets by 188,000 barrels per day (bpd) from July. Despite the increased production, supply concerns persisted with the Strait of Hormuz remaining closed, restricting exports from some oil producing countries.

Spot price for WTI crude oil climbed 3.26% to $95.35 per barrel, while Brent crude rallied 3.36% to trade at $98.81 per barrel this morning.

In other energy trading, gasoline prices jumped almost 3% to $3.13, while natural gas climbed to $3.19 and heating oil prices rose 3.1% to $3.70.

What to watch: Investors will continue monitoring the developments around the US-Iran talks as well as Iran-Israel offensive.

Data on the US EIA (Energy Information Administration) crude oil stocks will be released on Wednesday. The report released last week showed US crude inventories fell by 7.974 million barrels in the week ended May 29. This was the largest drawdown since February and significantly exceeded market expectations of a decline of 4 million barrels.

The markets today

US stocks in focus today ahead of the release of some major economic reports

Context: US stock indices ended Friday’s session in the red, following a major sell-off in tech stocks.

Details: US stock markets pulled back on Friday, with the tech-heavy Nasdaq 100 suffering its biggest single-day decline since April 2025.

The US economy added 172,000 jobs in May, significantly higher than the forecast of 85,000, following a 179,000 gain in the previous month. The US unemployment rate remained at 4.3% in May, in-line with market expectations.

The jobs data showing continued resilience in the US labour market triggered speculations of the Federal Reserve keeping interest rates higher for longer. Fears of elevated inflation and higher interest rates dampened market sentiment for stocks.

Stocks of chipmakers recorded huge declines on Friday. Micron Technology’s stock fell almost 13%, while shares of Advanced Micro Devices and Intel declined by around 11% each. Broadcom’s stock lost more than 7%, while Nvidia’s stock lost over 6%.

Some of the pullback was due to profit taking, with these stocks having rallied year to date. Micron Technology’s stock is up 173% year to date, while Intel’s stock is up 151% and AMD’s shares have more than doubled in value.

The Nasdaq 100 nosedived 4.18% to settle at 25,709.43 on Friday, while the S&P 500 tanked 2.24% to close at 7,383.74 and the Dow Jones index fell 1.35% to reach 50,866.78.

What to watch: Investors will monitor data on consumer inflation expectations scheduled to be released by the US today (1900 UAE Time). The median one-year-ahead inflation expectations, which rose to 3.6% in April from 3.4% in March, is expected to remain stable at 3.6%.

Data on balance of trade and existing home sales, scheduled for release on Tuesday, will also be in focus.

Other Markets: European indices closed mostly lower on Friday, with the STOXX Europe 600 Index, DAX 40 and CAC 40 down by 0.29%, 0.75% and 0.32%, respectively, and the FTSE 100 up by 0.07%.

The news shaping the markets

Russia struck a storage facility ⁠for spent nuclear ⁠fuel near Ukraine’s Chornobyl power plant. The news sent the USD/RUB pair lower in forex trading this morning.

Turkey’s treasury cash balance rose to -128,350 million lira in May, from -251,242 million lira in the previous month, lending support to the USD/TRY forex pair.

Indonesia’s foreign exchange reserves fell to $144.9 billion in May, from $146.2 billion in April. This being the lowest level since June 2024 sent the USD/IDR pair higher in forex trading this morning.

Japan’s current account surplus widened to ¥3,907.8 billion in April, from ¥2,370.0 billion in the same month a year earlier. The figure coming in above market expectations of ¥3,137 billion lent support to the USD/JPY forex pair.

China’s foreign exchange reserves climbed by $31.7 billion to $3.442 trillion in May. This being the highest since October 2015 sent the USD/CNY pair lower in forex trading this morning.

What else to watch today

South Africa’s 182-Day T-Bill Auction (1330 UAE Time), Mexico’s auto exports and auto production (1600 UAE Time) as well as France’s 12-Month BTF Auction (1700 UAE Time).