Mario Tama
Stock index futures were slightly higher in early trading Sunday on Wall Street, while oil also saw a moderate reaction following Iran’s attack on Israel.
S&P Futures (SPX) +0.3%Nasdaq 100 Futures (NDX:IND) +0.3% and Dow futures (INDU) +0.2% saw the first gains.
THE 10-year Treasury yield (US10Y) rose 5 basis points to 4.55% in a reversal of the risk trend seen on Friday.
WTI Crude Oil (CL1:COM) -0.1% and Brent crude oil (CO1:COM) -0.1% were slightly decreasing.
“The potential Israeli response to the Iranian attack is highly uncertain and will likely determine the extent of the threat to regional oil supplies,” Daan Struyven, senior global economist at Goldman Sachs, wrote in a note. “On the one hand, there are arguments to suggest that any response could be limited. The well-telegraphed and relatively limited nature of the Iranian attack suggests that it was calibrated to be a subdued retaliation for Israel’s bombing of its embassy in Damascus on 1 April and is not intended to be an escalation, in line with public statements made by Iranian officials.”
“Furthermore, international efforts are underway to limit the risk of military escalation, with President Biden emphasizing the diplomatic nature of the response which he intends to coordinate with other G7 leaders,” he said. “On the other hand, this is the first direct attack on Israeli soil by Iran.”
“Not responding forcefully to such an attack could be seen as setting a dangerous precedent and would be inconsistent with Israel’s previous modus operandi and with Prime Minister Netanyahu’s recent statement ahead of the planned Iranian attack that ‘anyone who does harm to us bad, we hurt him.” ‘”
“While we estimate oil prices already reflect a risk premium of $5-10 per barrel stemming from downside supply risks, we continue to see significant portfolio hedging benefits from investing in oil against negative geopolitical shocks” , Struyven said.