Global markets turned cautious on Monday as energy benchmarks jumped and equity futures fell, following a U.S. decision to interdict traffic to and from Iranian ports in the Strait of Hormuz after peace talks in Islamabad collapsed. The U.S. Navy was set to begin the blockade at 10 a.m. EDT - a move that sent Brent and WTI crude back above $100 a barrel and softened some of the optimism that had followed a recent ceasefire announcement.
Both Brent and WTI rose sharply on the blockade news, although both remain short of the highs recorded before last week’s ceasefire announcement. Brent has now gained roughly 40% since the conflict began, underscoring the sensitivity of oil markets to disruptions in the Gulf shipping lanes.
Equities reacted quickly. Wall Street futures were down almost 1% before the opening bell, European shares slipped and major Asian indexes finished lower. The dollar initially strengthened versus major currencies in early trading, then trimmed some of those gains as the session progressed.
U.S. President Donald Trump warned that gasoline prices could remain elevated through the November midterm elections - or even climb further - a comment that highlights the domestic political pressure tied to rising fuel costs. That domestic economic backdrop is visible in recent inflation data: U.S. consumer prices posted their largest monthly increase in nearly four years in March, leaving the annual rate at 3.3%. Gasoline prices accounted for the bulk of the monthly increase.
The prospect of prolonged higher fuel costs and the associated political pressure suggest an early resolution to the Middle East conflict is not assured. Market participants are already seeing the blockade as a partial unwind of the relief rally that followed the earlier ceasefire news.
In Europe, a major political development added another layer of market interest. Hungary’s long-serving nationalist leader was voted out of office after 16 years, with Peter Magyar’s party winning a landslide that is expected to deliver a two-thirds parliamentary majority. That outcome opens the path for Magyar to pursue warmer ties with the European Union and to pursue constitutional reforms. Financial markets in Hungary responded decisively: the forint surged and Hungarian government bonds rallied, with around 18 billion euros of previously frozen EU funds potentially becoming accessible again.
On the corporate calendar, the U.S. first-quarter earnings season is coming into focus as Goldman Sachs prepares to report today. Analysts expect a steady flow of results in the weeks ahead; an estimated 10% of S&P 500 companies are due to have reported by Friday, with a much larger tranche following thereafter. Major companies slated to report this week include Netflix, Johnson & Johnson and PepsiCo. According to analyst estimates compiled by LSEG IBES as of last Friday, S&P 500 earnings for the quarter are expected to rise by about 14% compared with the year-ago period. Notably, analysts have raised their full-year earnings growth forecasts for the index, although whether company guidance will support those higher estimates remains an open question.
Two major international gatherings also loom on the calendar. The IMF and World Bank Spring Meetings are scheduled to begin in Washington, while the OPEC Monthly Oil Market Report is due. Domestically, market watchers will be looking at U.S. existing home sales for March, and a speech from Federal Reserve official Stephen Miran will be among the commentary that could influence rates and sentiment.
Podcast and webinar notes: A daily podcast is available that examines the latest developments in the U.S.-Iran tensions and other geopolitical events, and a webinar discussion on safe-haven assets is scheduled for April 23, featuring a panelist from the ROI team.
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By this Friday, roughly 10% of S&P 500 companies are expected to have reported first-quarter results, with a substantial wave of earnings releases to follow. Beyond banks, the calendar includes several large-cap names whose results could shape investor expectations for the remainder of the reporting season and for full-year guidance.
Events to watch today
- U.S. March existing home sales (10 a.m. EDT)
- Speech by Fed official Stephen Miran
- Start of the World Bank and IMF Spring Meetings in Washington
- OPEC Monthly Oil Market Report
- U.S. corporate earnings: Goldman Sachs
Market participants now face a complex set of cross-currents: renewed supply-risk concerns in energy markets, domestic inflation pressure tied to gasoline, a significant political shift in Hungary with potential implications for EU funding, and the kickoff of a critical corporate earnings period that will test analysts’ upgraded profit forecasts.