Key TakeawaysOil prices on Friday spiked to highest level since the onset of the Iran war.European stocks and US futures dipped lower, headed for their worst week of the year.“Investors are scrambling to effectively price in the risk … but conditions are changing by the day,” Morningstar European markets strategist Michael Field says.
US stock futures pointed to a muted open on Friday, with S&P 500 contracts down 0.3% and those on the more technology-oriented Nasdaq 100 down 0.4%. So far this week, US equities have fared much better than Asian and European peers: The Morningstar US Market Index declined 0.8% through Thursday’s close in dollar terms.
“Investors are scrambling to effectively price in the risk of the current conflict on markets, but conditions are changing by the day,” Morningstar European markets strategist Michael Field says.
Oil prices continued their march higher Friday following sharp fluctuations through the course of the week as investors monitored the closure of critical energy gateway, the Strait of Hormuz.
Brent crude oil was up 1.5% Friday at USD 87, its highest level since July 2024. WTI crude was up 4.5% at USD 85.
The Morningstar Europe Index opened broadly neutral on Friday, remaining on course for a weekly loss of more than 4%, its worst week since the trade war-induced selloff in April of last year.
Markets whipsawed this week as investors digested the escalating US-Israeli war with Iran, which broke out over the weekend and quickly escalated into a regional conflict, choking off energy exports and disrupting maritime and air traffic.
One Week In, Asian Stocks Have Been Hit the Worst
With East Asian economies hevaily reliant on imports of energy products from the Middle East and on the back of a rally in the prior year, the region’s equities have suffered the worst declines among major regions.
The Morningstar Asia Index closed the week down 6.4%, its worst weekly performance since the depths of the pandemic selloff in March 2020. Korean stocks have been particularly volatile, as government intervention in the form of a USD 68 billion stabilization package reversed more than 12% of declines during Wednesday’s session.
What Comes Next?
Investors are now watching closely for the latest developments out of the Middle East, including continued disruptions to energy flows, with analysts pricing in further potential swings.
“It would take something special to reverse course at this point, some amazing earnings from big global names could help, but sentiment is hard to change and right now it’s in cautious mode,” Field says.