Another Brutal Week as Iran War Rages

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Lisa Kailai Han, Chloe Taylor, and Fred Imbert of CNBC report stocks tumble Friday as losses mount from Iran war impact, Dow and Nasdaq near correction: 

Stocks tumbled in volatile trading Friday as the U.S.-Israel conflict with Iran showed no sign of abating and oil prices continued their ascent.

The Dow Jones Industrial average shed 443.96 points, or 0.96%, ending at 45,577.47. The S&P 500 fell 1.51% and closed at 6,506.48, while the Nasdaq Composite lost 2.01% and settled at 21,647.61. The small-cap Russell 2000 declined more than 2% and slipped into correction territory — that is, a 10% decline from its latest high. At their lows of the day, the Dow and Nasdaq traded in correction territory, but ultimately closed shy of the 10% threshold.

The moves come after Iran and Israel exchanged strikes overnight, while the former also launched new attacks against energy sites in the Persian Gulf region. The Wall Street Journal reported, citing U.S. officials, that the Pentagon is sending thousands of additional Marines to the Middle East. CBS News said “heavy preparations” were being made for sending ground troops to Iran, citing multiple sources.

The selling ramped up in the afternoon, after Reuters reported that Iraq has declared force ‌majeure on all oilfields ​operated ​by foreign ⁠companies. This caused oil prices to climb, with Brent crude topping $113 a barrel at its high of the day and WTI oil trading over $98 a barrel.

“If this is an escalation involving troops on the ground, then we’re probably in for at least a couple more weeks of this sort of market of higher oil prices, high gas prices; you’re hanging on every headline about energy infrastructure in the region,” Baird investment strategist Ross Mayfield said to CNBC. “Quite frankly, equity markets haven’t sold off in a way that would reflect this sort of event yet, so there could still be some some downside ahead.”

Meanwhile, fears that inflation is reigniting and that rate cuts from the Federal Reserve are off the table pushed Treasury yields higher on Friday, further contributing to the stock market’s weakness.

The major averages posted their fourth losing week in a row. The S&P 500 has held up better than the other benchmarks, down just 7% from its recent high.

“It’s not unusual in the environment we’re in, with the amount of uncertainty we have, to have a 10% correction in any index,” said B. Riley’s Art Hogan. “So, to the extent that the S&P is broader and more diverse, it’s probably going to be the last to fall. But it’s also indicative of the fact that we’re in a very uncertain time.”

The selling was broad on Friday with tech leaders of the bull market seeing the biggest losses. Nvidia and Tesla lost 3% apiece. Few sectors were safe as rising yields also hit normally staid utilities. 

Rian Howlett and Karen Friar of Yahoo Finance also report the Dow, S&P 500, Nasdaq sell off to end another brutal week as Iran war rages:

US stock losses accelerated on Friday, while oil prices remained high, as investors weighed the possibility that the US might try to seize a key Iranian energy terminal to unblock the Strait of Hormuz.

The Dow Jones Industrial Average and the S&P 500 fell roughly 0.9% and 1.5%, respectively. Meanwhile, the tech-heavy Nasdaq Composite slid by a deeper 2% following a downbeat day on Wall Street.

Stocks are retreating as investors assess an Axios report that the Trump administration is considering plans to occupy or blockade Kharg Island, vital to Iran's oil exports. The risky operation would aim to put pressure on Tehran to reopen the Strait of Hormuz to tanker shipping.

Oil prices whipsawed as markets remained on edge amid headlines about the fast-moving Middle East conflict. On Friday, Iran pressed ahead with attacks on Persian Gulf neighbors as analysts warned existing damage would keep oil prices elevated. Brent (BZ=F) futures traded near $105 a barrel after swinging between gains and losses, while West Texas Intermediate (CL=F) futures hovered at around $97.

The major US stock gauges declined for the fourth straight week, with the Dow and Nasdaq Composite both nearing correction territory. 

80% of S&P 500 stocks tumble

Around four out of every five S&P 500 stocks slid on Friday, underscoring the breadth of the stock market’s drawdown.

About 400 members traded in the red in afternoon trading. The index as a whole slid more than 1.5%.

Utility stocks led Friday’s selloff, with the sector dropping more than 3.5%. Real estate and information technology followed, with both sectors down more than 2%. 

Alright, another crazy week on Wall Street where selling intensified as investors are wary that de-escalation in Iran is taking place (quite the opposite).

This week, key energy targets were hit in the region and that has everyone on edge, especially after Iraq declared force majeure: 

Crude prices topped $112 on Friday after Iraq declared a force majeure at all oilfields operated by foreign companies and drones struck two refineries in Kuwait.

International benchmark Brent crude futures rose 3.26%, or $3.54, to close at $112.19 per barrel. U.S. crude oil gained 2.27%, or $2.18, to settle at $98.32 per barrel. Brent prices gained nearly 9% this week, while U.S. oil was largely unchanged.

Iraq oil ministry sources told Reuters that Baghdad had declared the force majeure because it cannot ship crude through the Strait of Hormuz. Oil tanker traffic through the Strait has plunged due to attacks by Iran.

Drones also struck the Mina Al-Ahmadi and Mina Abdullah refineries in Kuwait on Thursday.

Basically, all eyes are on oil prices as this conflict intensifies.

What lies ahead is anyone's guess. 

On Friday evening, Trump said he doesn’t want Iran war ceasefire, but is considering ‘winding down’ military operations in the Middle East, sending Nasdaq-100 futures soaring:

But is he serious? Will people believe him or ignore him?  

We cannot rule out a ground invasion of Iran. Earlier today, it was reported that Trump is weighing several options for US troops inside Iran. 

So, unless you see a major pullback of US forces in the region, assume an escalation of the conflict.  

All I know is the longer this conflict goes on, the worse it will be for markets as funds deleverage and take risk off the table.

The effects of the war are also being felt in the real economy as gas prices rise all around the world, sending inflation expectations soaring:

The shift in inflation expectations is also weighing on the bond market where yields jumped this week, fuelling volatility in bonds:

And in Europe and the UK, where Brent crude prices have surged, recession fears are heightened as the continent braces for a wave of inlation amid a worsening energy crisis:

Worse still, as Eric Nuttall reminds us, the energy crisis will persevere even if the conflict ends tomorrow, which it won't:

And the floating oil shortage is a huge problem:

Which is why oil price forecasts are surging:

What about the stock market? What about it? Apart from energy, it's dismal out there and unless we see a nice bounce, expect more downside pressure, especially if the conflict escalates:

Still, there is way too much bearishness out there and volume today suggested we are getting closer to capitulation:

Interestingly, despite higher inflation expectations, silver and gold also tumbled hard this week as investors are now pricing in no rate cuts this year:

It's a crazy market with a lot of moving parts, and all I can tell you is I'm not surprised global macro hedge funds are once again outperforming this year, this is their type of market dominated by geopolitics, monetary policy, currency, commodity and fixed income swings.

On that note, it is worth mentioning the US is a net oil exporter and does well when oil prices go up, so I wasn't surprised to see strength in the US dollar since this conflict erupted.

Let me wrap it up there. Everyone is tired of this war, but I wanted to provide you with some market framework to understand all the moving parts. 

Below, Tom Lee, Fundstrat, joins 'Power Lunch' to discuss Lee's price target for the S&P, the market's potential to go higher and much more.

Next, Katie Stockton, Fairlead Strategies founder and managing partner, joins 'Squawk Box' to discuss the latest market trends, what to make of the recent volatility, market levels to watch for, and more.

Third, Keith Lerner, chief investment officer at Truist Wealth, joins 'Squawk on the Street' to discuss the state of the markets, the conflict in the Middle East and more.

Fourth, Jim Bianco of Bianco Research joins CNN’s OutFront with Erin Burnett to discuss the escalating economic and military tensions surrounding Iran and the global oil market.

Jim also joined Bloomberg Surveillance to discuss the escalating crisis in the Middle East and its profound impact on the global oil market and broader economy with Jonathan Ferro & Annmarie Hordern. 

Lastly, breaking Points with Krystal and Saagar are joined by professor John Mearsheimer to discuss the latest on Iran.Former Greek finance minister Yanis Varoufakis also appeared on their show earlier this week.

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