Markets rebound, but oil jitters and war risks keep nerves taut

Global equities rebounded yesterday as investors recalibrated after a bruising start of the week triggered by the escalation of strikes between Iran and Israel. The MSCI Emerging Markets Index rose nearly 1% on Monday, led by gains in GCC equities, while European and US stocks also posted gains. While the rebound reflects cautious optimism, tail risks remain firmly in place.

In Europe: The pan-European Stoxx 600 edged up 0.4%, led by a rally in energy and banking names, CNBC reports. The UK’s FTSE also rose to a near record high, closing up 0.3%.

US stocks also rebounded due to speculation over a possible truce between Israel and Iran, with the S&P 500 up 1% and the Nasdaq gaining 1.5%.

Middle East equities also joined the global rally, paring back some of the losses they made earlier this week and last Friday. The DFM gained 0.8%, ADX rose 0.2%, TASI was up 1.3%, and Egypt’s EGX30 inched up 0.1%.

The geopolitical premium was on full display in energy markets: Brent erased earlier gains to trade just below USD 75, paring back losses after last week’s 7% surge. Oil options volumes soared on Monday, with traders snapping up bullish Brent calls at USD 80 and USD 100, Bloomberg reported separately. Brent’s futures curve steepened into backwardation, suggesting fears of near-term supply shocks, especially if tensions escalate toward the Strait of Hormuz, through which 17 mn barrels per day of oil pass.

Despite calmer price action, the “margin for safety is getting ever narrower,” strategist Robin Mills wrote for the National.

Despite the rebound, forecasts point to a weaker year for US equities. RBC Capital Markets warned that the S&P 500 could drop up to 20% to 4.8k if higher oil prices drive inflation past 4%, earnings stall, and the Fed only cuts rates twice, Bloomberg reports. Even in a more benign scenario, the bank sees 13% downside from current levels. Other analysts, like Morgan Stanley’s Michael Wilson, remain cautiously optimistic on corporate earnings.

The bottomline? The rebound signals some relief, but the market’s risk appetite is still constrained by oil price volatility, geopolitical uncertainty, and policy recalibration. For now, investors are hedging hard and staying nimble.

MARKETS THIS MORNING-

Asian markets are also on the rise as investors’ attention splits between hopes for a potential truce in the Middle East and the Bank of Japan’s interest rate prospective move. Japan’s Nikkei is up 0.5%, while South Korea’s Kospi gained 1.1%, and Hong Kong’s Hang Seng was up 0.1%. Mainland China’s CSI 300 is flat in early trading. Over on Wall Street, futures fell following yesterday’s rebound.

THE CLOSING BELL: TADAWUL-

The TASI rose 1.3% yesterday on turnover of SAR 4.9 bn. The index is down 9.7% YTD.

In the green: Red Sea (+10.0%), Chubb (+10.0%) and NGC (+10.0%).

In the red: MBC Group (-3.1%), Sulaiman Alhabib (-2.3%) and Gulf Union Alahlia (-1.6%).

THE CLOSING BELL: NOMU-

The NomuC rose 1.0% yesterday on turnover of SAR 46.8 mn. The index is down 15.3% YTD.

In the green: Knowledge Tower (+16.4%), Asas Makeen (+14.4%) and Academy Of Learning (+9.8%).

In the red: Anmat (-12.5%), IOUD (-8.5%) and Future Care (-6.7%).

CORPORATE ACTIONS-

Tanmiah Food Company’s shareholders approved the distribution of SAR 44.8 mn in dividends at SAR 2.24 per share for FY 2024 starting Monday, June 30, according to a Tadawul statement.

Tam Development approved at a general assembly the distribution of a SAR 3 mn dividend payout at SAR 0.92 apiece for FY 2024 starting Sunday, June 29, it said in a disclosure to Tadawul.

Pan GulfMarketing’s shareholders greenlit a SAR 7.5 mn dividend distribution for FY 2024 at SAR 1 per share starting Thursday, 3 July, it said in a disclosure to Tadawul.