Oil spikes over 1% as Israel intensifies attacks

Today’s headlines

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

What happened: Spot oil prices climbed more than 1% this morning, after declining to six‑week lows over the weekend.

Crude soared on elevated supply concerns after Israel intensified its attack in Lebanon despite a ceasefire.

Why it matters: US President Donald Trump said over the weekend that said he was considering a preliminary deal to extend the ceasefire with Iran for another 60 days. Trump added that the US and Iran were close to “very good deal”.

Iran also indicated that both nations were in discussions to reach an agreement.

There are several obstacles in reopening the Strait of Hormuz, including the US removing the blockade and clearing the area of naval mines. Still hopes of a decision to reopen dampened oil prices over the weekend.

Oil prices climbed this morning on renewed tensions between Israel and the Iran-backed Hezbollah group despite a ceasefire announced more than six weeks back. Israel deployed troops deeper into Lebanon, capturing several areas in the southern region of the country.

Israel’s attacks raised concerns about the fragility of the ceasefire between the US and Iran. The escalation increased uncertainty over regional stability.

Spot price for WTI crude oil climbed 1.6% to $92.22 per barrel, while Brent crude rose 1.3% to trade at $96.13 per barrel this morning.

In other energy trading, gasoline prices jumped almost 3% to $3.12, while natural gas climbed to $3.359 and heating oil prices rose 2.5% to $3.58.

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

Data on the US EIA (Energy Information Administration) crude oil stocks will be released on Wednesday. US crude inventories contracted by 3.327 million barrels in the week ended May 22, compared to expectations for a drawdown of 4 million barrels.

The markets today

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

Context: US indices closed Friday at record highs, driven mainly by tech stocks.

Details: A good earnings season, with several companies beating expectations, and hopes of the US and Iran extending the ceasefire by another 60 days lifted market sentiment.

All three stock indices ended the week higher, with the Nasdaq 100 up more than 2% and the Dow Jones index and S&P 500 rising around 1%. They also closed the month with gains. The Nasdaq 100 outperformed the other two indices, recording gains of more than 8% for the month. The S&P 500 ended May with 5% gains, while the Dow Jones index climbed almost 3% in the month.

Shares of Dell Technologies rallied nearly 33% on Friday, its sharpest rise on record, after the company reported higher-than-expected results for the first quarter and raised its full-year guidance.

Shares of Micron Technology rose 5% on Friday, taking the monthly gain to a whopping 88%. Qualcomm’s stock rose 3% on Friday, recording gains of 40% in May.

The Nasdaq 100 rose 0.2% to 26,972.62 on Friday, while the S&P 500 rose 0.22% to 7,580.06 and the Dow Jones index added 0.72% to reach 51,032.46.

What to watch: Investors will monitor the ISM Manufacturing PMI and manufacturing new orders, scheduled to be released by the US today (1800 UAE Time)

The ISM Manufacturing PMI, which remained unchanged at 52.7 in April, is expected to slip slightly to 52.6 in May. The index tracking new orders for US manufacturers, which rose to 54.1 in April from 53.5 in the previous month, is expected to decline to 54.3 in May.

Other Markets: European indices closed mixed on Friday, with the STOXX Europe 600 Index and DAX 40 up by 0.14% and 0.05%, and the FTSE 100 and CAC 40 down by 0.16% and 0.07%, respectively.

The news shaping the markets

Ukrainian President Volodymyr Zelenskyy signalled an urgent need for a diplomatic solution to end the war with Russia. The news sent the USD/RUB pair lower in forex trading this morning.

China’s NBS Manufacturing PMI declined to 50.0 in May, from the previous month’s reading of 50.3. The figure coming in-line with expectations and remaining in the expansion zone exerted pressure on the USD/CNY forex pair.

Australia’s S&P Global Manufacturing PMI was revised higher to 50.7 in May, from a preliminary estimate of 50.2. However, the figure was still below April’s 51.3 in April and represented the fourth consecutive month of decline, which sent the AUD/USD pair higher in forex trading this morning.

Japan’s S&P Global Manufacturing PMI came in at 54.5 in May. This representing a decline from 55.1 in April lent support to the USD/JPY forex pair.

South Korea’s S&P Global Manufacturing PMI rose to 54.8 in May, from 53.6 in April, representing the strongest expansion since March 2021. However, the USD/KRW pair rose in forex trading this morning.

What else to watch today

Eurozone’s unemployment rate (1300 UAE Time), South Africa’s ABSA Manufacturing PMI (1300 UAE Time), India’s industrial production (1430 UAE Time) and manufacturing production (1430 UAE Time), Mexico’s business confidence (1600 UAE Time), Brazil’s   S&P Global Manufacturing PMI (1700 UAE Time), Canada’s S&P Global Manufacturing PMI (1730 UAE Time) as well as Mexico’s S&P Global Manufacturing (1900 UAE Time).