Dow, S&P 500, Nasdaq recover from major sell-off as Wall Street watches Iran fallout

Any time I field a market-based question from a friend or family member out of the blue, I take notice.

Today I heard a good one: “Why is the news telling me gas prices are going up $0.25 a gallon when the US is supposed to be energy independent — especially when I live next to one of the country’s largest refineries?”

First: Yes, the US is a net exporter of gasoline, but that doesn’t mean your region always has the cheapest supply. Gasoline is heavy, regulated, and constrained by logistics. Pipelines, storage, and seasonal blends can make it cheaper for some areas to import barrels than to pull them across the country.

Second: Even if you’re next door to a refinery, global crude oil prices (CL=F, BZ=F) set the tone. When oil spikes, gasoline prices (RB=F) usually follow quickly because it’s a pretty fungible product. If supply drops in the Middle East, their buyers source elsewhere — including US barrels — and prices tend to rise together.

Paramount Skydance (PSKY) said Monday morning that it plans to combine its Paramount+ streaming platform with Warner Bros. Discovery’s (WBD) HBO Max once Paramount’s acquisition of WBD closes.

The move is a potential challenge to streaming rival Netflix (NFLX), which bowed out of the race for WBD after Paramount raised the price of its offer to acquire WBD.

Shares in Paramount traded down by roughly 3%, while Netflix stock inched higher.

In a call with investors on Monday, Paramount CEO David Ellison said the company doesn’t plan to cut production and that his company’s purchase of WBD is “pro-competition, pro-consumer and pro-creative community,” according to Bloomberg. Paramount is targeting 15 theatrical films a year per studio for a total of at least 30 films annually, Bloomberg reported.

Executives on the call said they expect the deal to close in the third quarter, and that they expect both companies to have $69 billion in pro-forma revenue and $18 billion in estimated earnings before interest, taxes, depreciation, and amortization, with a combined net of $79 billion, according to Bloomberg.

Natural gas prices on the European energy market (TTF=F) have soared, gaining more than 45% through Monday trading before slightly paring gains as investors assess the conflict in Iran and the news that QatarEnergy is halting production of liquified natural gas (LNG).

Oil (CL=F, BZ=F) is the headline commodity risk for conflict in the Middle East and disruptions to tanker movement through the Strait of Hormuz, a critical global shipping chokepoint that runs between the coasts of Iran and Oman. But the corridor is also key for the gas market, as roughly 20% of global LNG supply crosses its waters every day.

Tanker traffic through the Strait has essentially halted since the US and Israel began striking Iran early Saturday morning, already tightening. Iran’s Revolutionary Guard Corps have instructed ships not to pass through the corridor, at least three tankers have been attacked, and major insurers have begun denying “war risk” insurance.

On Monday, Qatar’s QatarEnergy, one of the largest global producers of LNG, announced it was halting operations after the company’s facilities were struck by drones. Qatar itself is responsible for roughly 20% of the world’s LNG trade.

The pause in Qatar, alongside the stoppage of traffic of already-loaded LNG through the Strait, has put immense pressure on the European market.

The first 90 minutes of trading is showing some clear patterns — some expected, some not.

Defense and energy names are topping the S&P 500 (^GSPC), with Palantir (PLTR) and its deep connections to the US government at the top — up 6%. Axon (AXON), Northrop Grumman (NOC), RTX (RTX), and L3Harris (LHX) are also leaders (up 2%-4%).

In energy, Marathon Petro (MPC), APA (APA), Defon (DVN), Valero (VLO) and ConocoPhillips (COP) are all up 3-4%.

Interestingly, bitcoin is rallying in the face of dollar strength, catapulting Strategy (MSTR) to the top of the Nasdaq 100 Index (^NDX) — up 7%. And in the S&P 500, Coinbase (COIN) is the #3 gainer — up 4%.

Large-cap energy (XLE) opened with a 3.5% gain, which has faded to 1% in the opening minutes.

To the downside, consumer discretionary (XLY), materials (XLB), financials (XLF), and communication services (XLC) are all off 1% or more.

Meanwhile, the S&P 500 index (^GSPC) itself opened with a 1% loss right around the big 6,800 level — but it’s now rebounded. This is the fourth test of 6,800 this year and is one to watch into the close.

The sideways trading ranges in the S&P and the Nasdaq (^IXIC) have been frustrating the bulls and the bears since late last year.

The major US stock indexes careened into the red at the opening bell on Monday as investors fled to safe-haven assets. The tumble comes as the US-Iran conflict continues to broaden out, engulfing an increasingly large part of the Middle East.

The Dow Jones Industrial Average (^DJI) fell by 1.1%, or just over 500 points. Meanwhile, the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) sank 0.9% and 0.8%, respectively.

Oil prices surged on Monday, as Brent crude (BZ=F) jumped by as much as 13% to top $82 a barrel before slightly paring back gains. West Texas Intermediate futures (CL=F) changed hands just below $73, up around 8%. While Iran is OPEC’s fourth-largest producer, markets are also bracing for sustained disruption in the key Strait of Hormuz, where tanker traffic is at a standstill.

In Europe, gas futures (TTF=F) — heavily exposed to disruption to gas flows through the Strait of Hormuz — exploded higher by more than 45%.

The dollar (DX-Y.NYB) and gold futures (GC=F) are both bid as we await the opening bell for stocks — a reminder that cash and bullion can rally together when investors scramble for safe havens.

Besides gold (and silver to a limited extent), crude oil is also surging. WTI (CL=F) is ripping on obvious supply-risk fears tied to geopolitics, and it’s dragging energy stocks higher even as most sectors are set to open in the red.

The twist: long-term US Treasurys yields (^TNX, ^TYX) are spiking as bonds are getting dumped, not bought. That’s as investors demand extra yield for longer-term risk (what’s called the term premium) — plus systematic strategies dialing down longer-term (duration) exposure as volatility rises.

Geopolitical shocks often fade fast in markets, but some linger. Watch the Cboe Volatility Index (^VIX) above 20 as a gauge of institutional hedging demand (read: skittishness).

Norwegian Cruise Line Holdings Ltd. (NCLH) stock fell 7% before the bell on Monday. The cruise line released its fourth quarter earnings, and despite beating analyst estimates, the group’s stock fell as investors worried about the rise of oil prices driving up fuel costs. Royal Caribbean (RCL) shares also fell 5% during premarket hours today.

Berkshire Hathaway’s (BRK-B) stock fell 1% during premarket hours following the release of its fourth quarter earnings on Saturday. Berkshire’s operating profit after taxes fell 30% from a year ago.

American Airlines’ (AAL) stock fell 5% before the bell on Monday, as the rise in oil prices caused worry among investors that fuel costs would increase.

Gold futures (GC=F) rose on Monday, trading above $5,400 per ounce as the ongoing conflict in the Middle East caused investors to move toward safe-haven assets.

Yahoo Finance’s Ines Ferré reports:

Read more here.

The dollar (DX=F) rose against other currencies as high oil prices led investors to think the Federal Reserve won’t cut rates soon.

Bloomberg News reports:

Read more here.

Tesla (TSLA) gained market share again in France and Norway in February, according to official data, in a sign of stabilization in Europe after two years of declining sales. Tesla stock fell 2% before the bell on Monday.

Reuters reports:

Read more here.

Airline, hotel, and defense stocks began to react to the Iran conflict on Monday during premarket hours. Lockheed Martin (LMT) shares rose 7% before the bell on Monday, alongside RTX (RTX). BAE Systems’ (BA.L) London shares were up 5%.

Energy companies also saw their stocks jump, with New Fortress Energy (NFE) shares rising 15% in premarket trading. Oil major Equinor ASA (EQNR) rose 4%.

Bloomberg News reports:

Read more here.

Gold (GC=F) prices catching a strong bid this morning to over $5,400 an ounce.

Helpful chart from JPMorgan showing how gold prices have reacted around prior Middle East conflicts:

The JPMorgan team sees upside potential for oil (CL=F, BZ=F) prices to $120 a barrel if the war spreads throughout the Middle East:

No surprise here, some of the most visited ticker pages on Yahoo Finance this morning include Exxon Mobil (XOM), Lockheed Martin (LMT), Chevron (CVX) and Occidental Petroleum (OXY).

You can check out the full list of names here.

Some helpful charts from EvercoreISI on the exposures for the oil majors.

Oil (CL=F, BZ=F) prices have surged this morning post the launch of the US attacks on Iran.

Goldman thinks a good deal of upside may be left for prices:

How Goldman is thinking about the markets in the wake of the US attacks against Iran: