S&P 500 broad market index futures rose by
0.56% to 6,006 points this week, recovering after Friday’s sharp sell-off, when
the benchmark dropped 1.0% to 5,973 following Israel’s strikes against Iran.
The geopolitical shock sparked fears of an oil supply disruption, sending Brent
crude prices surging by 11.6% to $78.71 per barrel. Over the weekend, strikes
continued between the two countries, though emerging signals of Iran’s
willingness to negotiate helped ease market concerns.
Oil prices climbed again on Monday, reaching
$78.15 per barrel of Brent crude, but further gains may be limited unless the
conflict escalates further. The market is adjusting to the new price range,
with strong resistance now established at $76.00–78.00. A significant trigger —
such as Iran attempting to close the Strait of Hormuz, a crucial passageway for
over 20% of global oil exports — could push prices towards $86.00–88.00,
potentially ending the current downtrend and setting up a bullish trajectory
with a base target of $100.00 per barrel.
The spike in oil prices has narrowed the room
for monetary easing by the Federal Reserve. If crude continues to rise, the
probability of a rate cut in 2025 may diminish. This outlook could shift only
in the case of a major downturn in the U.S. stock market — a scenario few
currently expect. Therefore, at the first sign of de-escalation in the Middle
East, the S&P 500 rebounded. The benchmark held support above 5,940 points
and is now making another attempt to reach 6,040. A breakout above this key
level would pave the way towards the extreme upside target of 6,300–6,400
points.
Large investors showed strong buying interest
last week, though this data predates the Israeli attack. Net inflows into the
SPDR S&P 500 ETF Trust (SPY) totaled $7.13 billion — a robust figure,
especially for the summer period. Without the geopolitical shock, the
positioning could have signaled a confident bet on a new all-time high. No data
has yet been released for Friday’s flows, but optimism persists that inflows
continued despite the turmoil.
Investors are now closely watching key U.S.
macroeconomic releases. On Tuesday, retail sales data will be published, and
following the recent slowdown in inflation, a decline in consumer spending
appears likely. Retail sales are forecasted to contract by 0.6%
month-over-month. If confirmed, this would give the Fed room to maintain a more
balanced stance during Wednesday’s policy meeting. The Fed will also unveil an
updated dot plot for interest rates. While rising oil prices add inflationary
pressure, clear signs of economic slowdown must also be taken into account.
In this complex environment, a balanced
approach by the Fed seems prudent. A continued recovery in the S&P 500
toward 6,040 is possible. However, a more hawkish tone from policymakers could
trigger a pullback to 5,940, potentially signaling the start of a bearish
reversal. On the other hand, dovish commentary might open the door for a
breakout above 6,040 and an advance toward higher levels.
Technically, the S&P 500 remains in an
uptrend. Futures are trading within the bullish formation that previously
targeted 5,940–6,040. With the benchmark holding above 5,940, the odds of an
upward move to 6,040 remain high. A breakout would activate the scenario
pointing toward 6,300–6,400. Failure to stabilize above 5,940, however, would
likely lead to a retreat toward the 5,840–5,860 zone and potentially a reversal
into a downtrend.
Oil markets remain on edge. Brent prices have
broken through resistance at $67.00–69.00 and surged to the next technical
ceiling at $76.00–78.00. From here, a pullback to $69.00 is possible unless
further escalation — such as direct U.S. involvement in strikes against Iran —
triggers a breakout toward $86.00–88.00.
Gold, meanwhile, has benefited from the Middle
East tensions. The breakout above resistance at $3,330–3,350 per troy ounce was
immediate following Israel’s strike. Prices spiked to $3,430–3,450, but failed
to sustain momentum and have since retreated to $3,412. Despite recent gains,
downside risks remain elevated, and the base scenario still suggests a pullback
toward $3,030–3,050 per ounce.
In currency markets, the U.S. Dollar weakened,
falling to key support levels. Following softer-than-expected inflation data,
the EURUSD broke above its November 2021 peak at 1.15730 and climbed to
1.16310, suggesting a renewed bullish phase. A reversal may be on the horizon,
with the Federal Reserve’s meeting and European Central Bank President
Christine Lagarde’s speech on Thursday likely to influence the next move.