Tech revival bolsters Wall St as Middle East conflict weighs
US President Donald Trump sees military operations lasting four-to-five weeks.
Stocks on Wall Street pared their earlier losses to be mildly positive as Nvidia’s plans to develop a chip specifically to help artificial intelligence firms build faster and better tools provided some confidence to the beat-up tech sector, while Palantir Technologies was among the beneficiaries of the widening conflict in the Middle East.
Brent crude oil futures and gold prices remained elevated with investors on edge after the US and Israel launched airstrikes on Iran in an escalating conflict that US President Donald Trump expects to last for four-to-five weeks, while yields on US Treasuries climbed amid fears the rising energy costs could spill over into consumer price rises.
Meanwhile, Norway’s Equinor and its partners made a commercial oil discovery in the North Sea as it seeks to maintain current production levels through to 2035.
Locally, Australian futures are pointing to a soft start to the trading day across the Tasman and the kiwi dollar is broadly weaker as investors continue to digest the impact of the US-Iran conflict, with Reserve Bank of Australia governor Michele Bullock due to speak at a business conference and Statistics New Zealand’s latest building consents figures due.
On edge
Investors remained on edge as the US-Iran conflict dragged into another day with the volatility index – known as Wall Street’s fear gauge – up 5.4% at 20.94 in a whippy day for stock markets.
The S&P 500 index nudged 0.1% higher in late trading with the Dow Jones Industrial Average marginally weaker, while the tech-heavy Nasdaq Composite advanced 0.5% with Nvidia rallying on its plans to develop a new chip to help AI startups such as OpenAI build faster and more efficient tools.
Palantir Technologies was up 6.6% in late trading, benefiting from its close ties to US defence and intelligence operations, and joining gains among other military contractors such as Lockheed Martin and RTX.
Brent crude oil futures were up 5.7% at US$76.99 a barrel as the Strait of Hormuz remained effectively closed with insurers unwilling to cover vessels passing through the channel and Qatar suspended liquified natural gas production after it was targeted by an Iranian drone attack.
US President Trump said he expected military operations to last for four-to-five weeks as he seeks to destroy Iran’s missile capabilities, wipe out its navy, stop it from obtaining a nuclear weapon and end its support for terrorist groups acting as its proxy.
“Market reaction has been contained to the extent that investors believe the US elections later this year mean that the US won’t want an enduring conflict that results in sustained higher oil prices, while Iran’s defence capability was severely curtailed after last year’s attacks,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The biggest reaction has been for commodity markets and bonds, with higher oil and gas prices adding to inflation concerns, and the stronger than expected US ISM manufacturing survey adding to the mix.”
A tight bond
The yield on 10-year US Treasuries rose 8 basis points to 4.06% while gold futures, the traditional haven for investors, were up 1.2% at US$5,213 an ounce.
That uncertainty prompted NZX-listed Property for Industry to postpone briefings for a planned bond offering while it gauges the impact of the Middle Eastern conflict.
Across the Atlantic, stock markets were hit harder with the UK’s FTSE 100 index dropping 1.2% with British Airways parent International Consolidated Airways Group among the biggest losers on the board. Meanwhile, declines in European automakers including BMW and Stellantis weighed more broadly as Germany’s DAX fell 2.6% and France’s CAC 40 declined 2.2%.
Meanwhile, Norway’s Equinor jumped 8.2% after saying it found a commercial oil discovery in the North Sea with partners Petoro, Harbour Energy, Inpex Idemitsu and Var Energi. Preliminary estimates indicate the discovery holds between 25 million and 89 million barrels of recoverable oil, which would support the Norwegian energy firm’s aspirations to keep production in 2035 at the same level as 2020.
The gloomy mood is set to ripple into antipodean markets with Australian futures pointing to a 0.5% decline for the S&P/ASX 200 index when trading opens across the Tasman. The Australian index stayed in positive territory on Monday, buoyed by its resources sector.
Meanwhile, the kiwi dollar dropped to 59.40 US cents at 7am in Auckland from 59.86 cents yesterday and fell to 83.87 Australian cents from 84.19 cents.
The Australian Financial Review business summit launches today with a keynote address from Reserve Bank of Australia governor Michele Bullock, while Stats NZ is due to release January building consent figures.
