Geopolitical Tensions Escalate, Oil Rises; US Equities Mixed, Russell 2000 Outperforms

Lead Geopolitical tensions intensified over the weekend with Ukraine launching aerial attacks on Russia and reports of an IRGC drone strike on an oil tanker near the Strait of Hormuz. WTI crude rose 1.42% to $82.40/bbl. US equities closed mixed, with the Russell 2000 ETF gaining 0.47% while the S&P 500 ETF fell 0.23%. Session narrative Geopolitical developments dominated the weekend, with Ukraine launching significant aerial attacks on Russia, killing at least 6 people. Russia, in turn, claimed to have struck Ukrainian ports and seized two settlements in the Donetsk region. Adding to the tensions, an IRGC drone reportedly struck an oil tanker near the Strait of Hormuz, and Yemen's Mocha port suspended operations after Houthi assaults. These events contributed to a rise in crude oil prices, with WTI crude settling up 1.42% at $82.40/bbl. The US Department of Energy also reported oil reserves dropping below 300 million barrels for the first time since the 1980s. In equity markets, US indices were mixed. The Russell 2000 ETF outperformed, gaining 0.47%, while the S&P 500 ETF declined 0.23% and the Nasdaq 100 ETF fell 0.15%. Long-duration Treasuries (TLT) were down 0.62%, and the US 10-year yield rose 1.19%. The US Dollar Index saw a slight decrease of 0.03%. Macroeconomic data included a drop in US consumer sentiment for the first time in three months and a rise in Peru's GDP by 1.75% in June. Nvidia was reportedly in talks to invest up to $3 billion in SB Energy. Cross-asset check Equity markets saw a mixed close, with the Russell 2000 ETF gaining 0.47% to 304.9, while the S&P 500 ETF fell 0.23% to 776.03, and the Nasdaq 100 ETF declined 0.15% to 731.01. Futures mirrored this trend, with Russell futures up 0.48% and S&P and Nasdaq futures down 0.22% and 0.15% respectively. In fixed income, long-duration Treasuries (TLT) were down 0.62% and the US 10-year yield rose 1.19% to 4.7%. The US Dollar Index (DXY) saw a minor dip of 0.03% to 99.64. EUR/USD rose 0.36% to 1.1573, reaching an 8-week high. USD/JPY was down 0.12% to 159.305. Commodities were notably active, with WTI crude up 1.42% to $82.40/bbl and Brent crude gaining 1.67% to $88.52/bbl. Gold saw a modest increase of 0.38% to 4437.3. Wheat prices climbed over 3% to above $6.70 due to Black Sea risks. Themes & continuing stories Geopolitical tensions remain a dominant theme, with the ongoing conflict in Ukraine and heightened activity in the Middle East impacting energy markets and broader sentiment. The reported IRGC drone strike and Houthi assaults highlight persistent risks to shipping and oil supply. Energy markets are also reacting to the US DOE's oil reserves falling below 300 million barrels. In the tech sector, Nvidia's potential $3 billion investment in SB Energy for an OpenAI data center deal is a key story to watch. Macroeconomic concerns include the recent drop in US consumer sentiment, which could signal headwinds for consumer spending. What’s ahead Looking ahead, market participants will continue to monitor geopolitical developments in Eastern Europe and the Middle East for their potential impact on energy prices and global trade. Any further escalation or de-escalation in these regions could significantly influence market sentiment. Economic data releases in the coming week will also be crucial, particularly any updates on inflation and consumer confidence, which could provide further clues on the Federal Reserve's policy path. Corporate earnings and any new M&A activity, such as the Nvidia-SB Energy talks, will also be closely watched.