Recent Israeli strikes on targets in western Iran in response to previous attacks have ignited geopolitical tensions, prompting a surge in oil and gold prices as markets brace for potential escalation. Isfahan, a city housing military and nuclear facilities, remains a focal point of concern, although Iran has assured the safety of its nuclear site.
Brent crude briefly surpassed $90 per barrel before retracing to around $88.50, while US crude breached $86 per barrel. Additionally, Wheat Futures surged by 2%, and gold rebounded, nearing record levels, with the Swiss franc gaining ground amidst the heightened geopolitical uncertainty.
As investors seek safety amid escalating tensions, the flight to safety is expected to persist ahead of the weekly closing bell. Amidst the volatile landscape, shorting oil and gold entails risks, with exposure to these commodities serving as a hedge against geopolitical turmoil in the region.
In other commodity news, cocoa futures experienced a significant uptick, surging nearly 10% to surpass $11,000 per ton. Speculation mounts as hedge manager Pierre Andurand predicts a potential rise to $20,000 per ton, citing supply shortages as a driving factor.
Meanwhile, tech investors exhibited mixed reactions to Taiwan Semiconductor Manufacturing Company’s (TSMC) earnings report, despite better-than-expected revenue and earnings year-over-year. Disappointment ensued due to a 5% decline in revenue and income compared to the previous quarter, coupled with a tempered outlook for the chip market expansion, particularly in smartphones, personal computers, and the automotive industry.
While TSMC anticipates a minimum 20% revenue growth for the year, subdued market sentiment led to a nearly 5% decline in TSMC shares post-earnings. Similarly, Micron Technology (MU) faced downward pressure, despite news of receiving over $6 billion in grants from the US government for domestic factory projects.
Netflix (NFLX) reported robust subscription growth, adding over 9 million new subscribers in Q1 2024, but disappointed investors with its Q2 revenue forecast and decision to discontinue reporting quarterly subscribers next year. The stock dipped nearly 5% in after-hours trading, reflecting market concerns.
Overall, US jobless claims came in lower than expected, and the Philly Fed manufacturing index experienced an unexpected uptick. Hawkish comments from Fed officials further weighed on market sentiment, contributing to weakness in tech stocks. Additionally, the EUR/USD faces downside pressure amid diverging Fed and ECB expectations, while the USD/JPY remains subdued amidst easing core inflation in Japan. As US futures trend lower, the risk rally may falter amid uncertainty surrounding chip companies’ earnings and geopolitical tensions.
