Stock market futures slipped on July 22 as oil prices surged following escalating Middle East tensions, with Brent crude rising 3.4% to $94.07 per barrel and West Texas Intermediate climbing 3% to $86.83 amid the 11th consecutive round of U.S. strikes against Iran.
The S&P 500 fell 0.14% to close at 7,498.96, while the Nasdaq Composite slipped 0.57% to 25,690.90 and the Dow Jones Industrial Average lost 6.06 points, or 0.01%, finishing at 52,218.58.
Oil prices advanced following the latest U.S. military strikes on Iran, with Secretary of State Marco Rubio telling reporters that Iran is “not serious about talks.” Rubio also said that American forces would “continue to protect shipping” through the Strait of Hormuz, the critical chokepoint through which roughly one-third of the world’s seaborne oil passes.
Oil Inflation Fears Weigh on Markets
Traders have kept a close eye on oil prices because they fear elevated crude could keep consumer goods prices elevated, which may force the Federal Reserve to raise rates sooner than expected.
Thomas Martin, senior portfolio manager at Globalt Investments, noted that inflation remains a key concern for investors. “Inflation is definitely elevated, and I don’t think there’s a lot that the Fed can do about it,” Martin said. “Something that definitely is weighing on the market is where are rates really headed from here?”
As of Wednesday afternoon, fed funds futures traders were pricing in a nearly 34% chance of a rate hike from the Fed this month, up sharply from 10% a week ago. Traders were also pricing in a 78% chance of at least a quarter-point hike in September, according to the CME FedWatch tool.
The market’s caution came despite a busy earnings season, with reports due from Alphabet and Tesla alongside ServiceNow, International Business Machines, and Texas Instruments, as investors weighed whether strong demand for artificial intelligence infrastructure could offset the headwind of higher energy costs.
Sources
- CNBC — S&P 500, Nasdaq, and Dow closing prices on July 22; Brent and WTI oil prices and percentage gains; Secretary of State Marco Rubio’s statements on Iran negotiations and Strait of Hormuz protection; trader commentary from Thomas Martin; Fed rate hike probability data from CME FedWatch tool.
- Reuters — Oil prices climbing to five-week highs on U.S.-Iran attacks and concerns over Strait of Hormuz disruption.
