Equities Dip as Oil Surges 5%; Geopolitical Tensions and Fed Comments Weigh

Lead US equities closed lower today, with the S&P 500 ETF down 0.04% and the Nasdaq 100 ETF losing 0.27%. WTI crude oil surged over 5%, while geopolitical tensions involving Iran and hawkish Fed comments contributed to market unease. Session narrative US equities ended the session in negative territory, with major indices experiencing slight declines. The S&P 500 ETF (SPY) closed down 0.04%, while the Nasdaq 100 ETF (QQQ) fell 0.27%. The Dow ETF (DIA) also saw a modest dip of 0.09%, and the Russell 2000 ETF (IWM) was down 0.52%. Volatility, as measured by the VIX, rose 3.42%. In the commodities market, WTI crude oil (CL) surged 5.08%, and Brent crude (BZ=F) gained 4.94%, reflecting ongoing geopolitical concerns and supply chain stress. Gold (GC) saw a gain of 1.08%, and silver (SI=F) climbed 3.84%. Natural gas (NG=F) also rose significantly, up 4.40%. Fixed income markets saw the US 10-year yield (TNX) increase by 0.84%, while Long-duration Treasuries (TLT) declined by 0.77%. The US Dollar Index (DXY) strengthened by 0.27%. In FX, USD/JPY (USDJPY) rose 0.99%, while EUR/USD (EURUSD) was down 0.14%. Geopolitical tensions remained a key theme, with multiple reports detailing US demands for compensation from Iran and discussions around missile technology. Fed comments also influenced sentiment, with Fed's Hammack indicating that 'some number' of rate hikes may be needed and that inflation won't come down on its own. Corporate news included Lockheed Martin's announcement of a new product center and Sionna Therapeutics discontinuing a cystic fibrosis drug. Cross-asset check Equities broadly declined, with the S&P 500 ETF down 0.04% and the Nasdaq 100 ETF down 0.27%. Volatility increased, with the VIX up 3.42%. Commodities saw significant gains, led by WTI crude oil surging 5.08% and Brent crude up 4.94%. Natural gas also climbed 4.40%. Gold and silver posted gains of 1.08% and 3.84% respectively. In fixed income, the US 10-year yield rose 0.84%, while long-duration Treasuries fell 0.77%. The US Dollar Index strengthened by 0.27%. USD/JPY gained 0.99%. Themes & continuing stories Geopolitical tensions, particularly involving Iran, continue to be a dominant theme, impacting energy markets and overall risk sentiment. The US has demanded compensation from Iran, and discussions around missile technology persist. Inflation concerns remain at the forefront, exacerbated by surging commodity prices and hawkish comments from Fed officials. Fed's Hammack indicated that 'some number' of rate hikes may be needed, reinforcing expectations for continued monetary tightening. Supply chain stress also remains a factor, contributing to commodity price volatility. What’s ahead Market participants will be closely watching for upcoming macroeconomic data, particularly the US CPI report on August 12th, which is expected to provide further insights into inflation trends and potential Fed policy actions. Morgan Stanley's outlook on US CPI will also be of interest.