Oil Surge and Geopolitical Tensions Weigh on U.S. Equities; Dollar Strengthens Amid Market Volatility

U.S. equity markets closed sharply lower on Thursday, driven by a significant increase in crude oil prices and escalating geopolitical tensions in the Middle East. The Dow Jones Industrial Average dropped 731 points, or 1.5%, while the S&P 500 and Nasdaq Composite both fell by 1.5% and 1.8%, respectively. The surge in oil prices intensified pressure on U.S. equities, with Brent crude rising 9.2% to $100.46 and WTI crude climbing 9.7% to $95.73. Concerns over potential supply disruptions due to tensions surrounding Iran have heightened market anxiety. Statements from Trump administration officials indicated that the U.S. military is not prepared to escort oil tankers through the Strait of Hormuz, exacerbating fears of tighter global supply.

Corporate Movements Amid Market Turmoil

In the corporate sector, fertilizer companies saw gains amid expectations of rising fertilizer prices due to shipping disruptions. Mosaic Co. experienced a 7.6% increase, while CF Industries Holdings surged by 13%. Conversely, technology stocks faced downward pressure, with Nvidia declining by 1.5% and Meta Platforms dropping 2.6%. UiPath also fell 8.2% after it forecasted slower fiscal-year revenue growth, despite exceeding expectations for its fourth-quarter results.

As of the latest data, the S&P 500 was trading around 6,686, while the Nasdaq Composite hovered near 24,552. Market participants are closely monitoring developments in energy markets and geopolitical tensions. The U.S. has initiated trade investigations into 60 economies, including China, the EU, and India, over concerns regarding goods produced with forced labor entering global supply chains. This could lead to new tariffs and heightened trade tensions. The outlook for intraday trading remains uncertain, with rising oil prices and increasing global trade concerns contributing to a bearish sentiment. A critical level to watch is $6,579 on the S&P 500; a breach below this could accelerate downward momentum.

Key Economic Data on the Horizon

Market participants are poised to analyze key economic data releases, including Q4 GDP, Core PCE inflation, and JOLTS job openings, which may offer insights into inflation trends and the Federal Reserve’s policy outlook. Technically, immediate resistance is noted at yesterday’s high of $6,765, followed by the 100-Day SMA at $6,847 and the 50-Day SMA at $6,883. Immediate support is identified at the 200-Day SMA at $6,622, with the key level at $6,579 representing the current week’s low.

Crude Oil Prices Continue to Climb

On Thursday, crude oil prices surged again, with WTI closing nearly 9% higher and Brent up 8.82%. Both benchmarks remained stable during Friday’s Asian session, with Brent trading above $100 per barrel. As tensions in the Middle East persist into a second week, the International Energy Agency has warned that the current oil supply disruption is unprecedented in the history of the oil market. It is estimated that global oil supply could decrease by 8 million barrels per day in March, reflecting a decline of over 7% from the approximately 107 million barrels produced in February. Despite the U.S. Department of Energy’s announcement to release 172 million barrels from reserves as part of a coordinated effort by 32 IEA member countries to release a total of 400 million barrels, market volatility is expected to remain high, with oil prices largely influenced by news developments.

From a technical standpoint, the 4-hour chart for WTI indicates prices are maintaining levels above the 9-EMA, currently providing potential support near $94, followed by the 21-EMA at approximately $91.35. Further price increases could occur if WTI breaks above session highs near the $98 mark.

Dollar Strengthens Amid Geopolitical Risks

The U.S. dollar rose by 0.49% on Thursday and is up 0.08% this morning, trading at 99.83. Elevated geopolitical risks in the Middle East have contributed to the dollar’s gains. As the region enters its 13th day of conflict, oil prices have become a dominant factor influencing the dollar’s strength. The surge in energy prices, driven by the U.S.-Israeli actions against Iran, has increased inflation concerns and affected growth forecasts globally, including in the U.S., where Treasury prices have been declining. However, the dollar has continued to rise, supported by the U.S.’s status as the world’s leading oil producer and the dollar’s role as the primary currency for global crude transactions.

In the options market, bullish sentiment for the dollar persists. According to Bloomberg, the options market indicates that the dollar could reach levels of 100.43 seen in December. One-month risk reversals, which assess the demand difference between bullish and bearish dollar options against major peers, have risen to their highest level since late 2022 at 92 basis points.

Technically, the dollar is at a pivotal point, currently trading within an ascending channel. Major resistance is identified at $99.92, with a sustained break above this level potentially leading to further upward movement toward the psychological $100 mark. On the downside, support is noted at $99.41, the opening level from yesterday.

Gold Prices Under Pressure

Gold is on track for its second consecutive weekly decline as the strengthening dollar and rising oil prices, driven by the Middle East conflict, weigh on the precious metal. Gold was trading slightly above $5,100 per ounce today, reflecting a 0.47% increase, as some buyers entered the market following recent dips. In contrast, silver prices fell by 1.60% to $82.40.

Tensions in the region remain high, with strong statements from key figures amid ongoing hostilities. The conflict has disrupted shipping through the Strait of Hormuz, contributing to rising oil prices. Increased oil prices are heightening inflation concerns, leading to diminished expectations for imminent interest rate cuts by the Federal Reserve and other central banks. Investors now see almost no chance of a rate cut at the next Fed meeting, with about a 70% probability of one cut later this year. Higher interest rates typically exert downward pressure on gold, a non-yielding asset.

The ongoing conflict involving the U.S., Israel, and Iran has also hindered gold’s recent rally. Over the past two weeks, price movements have been volatile, as some investors sold gold to cover losses in other markets. Despite the recent pullback, gold remains up approximately 18% this year, consistently trading above $5,000 per ounce.

Currently, gold prices are consolidating within a narrow range between $5,070 and $5,130, indicating a potential pause before the next significant move. Immediate resistance is around $5,130, followed by $5,188, while initial support is at $5,037, with stronger support at $4,994.

Silver prices have been forming lower highs, indicating that buyers are not yet in control. The first resistance level is around $83.7, followed by $84.9. Support is near $81.50, with stronger support around $80.

Gold Prices in the UAE:
24k: AED 615.00
22k: AED 569.50
21k: AED 546.00
18k: AED 468.00
14K: AED 365.00