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S&P500 Forecast: SPX rises as oil prices fall despite the ongoing Israel-Iran conflict

Article By: ,  Senior Market Analyst
Today 1:55 PM

US futures

Dow futures 0.67% at 42,447

S&P futures 0.70% at 6017

Nasdaq futures 0.78% at 21808

In Europe

FTSE 0.47% at 8885

DAX 0.6% at 23634

  • US stocks rebound after losses last week
  • Falling oil prices help the mood ahead of Wednesday’s Fed decision
  • Oil eases as supply remains unaffected by the Middle East conflict

US stocks rebound as oil prices fall

U.S. stocks are set for a positive open after losses last week as easing oil prices lift sentiment despite the ongoing conflict between Israel and Iran.

U.S. stocks fell over 1% on Friday and oil prices surged 7% as Israel and Iran traded attacks, which the market fretted could disrupt oil exports from the Middle East.

Oil prices moved lower at the start of the week, calming worries in the border market. Leaders from the group of seven nations meet today, with the dangers of further escalation in the Israeli-Iran conflict looming over the meeting. Despite hopes that the deal could be agreed upon, there are no signs of the conflict abating four days on.

There is no high-impacting U.S. economic data today, and the markets will be relieved to see oil prices lower ahead of the Federal Reserve interest rate decision on Wednesday. The Fed is not expected to cut rates, and investors will instead focus on Fed chair Jerome Powell's comments as well as the central bank's updated projections and dot plots.

The markets are pricing in 48 basis points of rate cuts by the end of the year, with the first rate cut expected in September.

Corporate news

US Steel rallies after Trump approves the traversal merger with Japan's Nippon steel trump issued an executive order allowing the US deal and Nippon to finalise the merger as long as they signed a national security agreement with the US government.

Victoria secrets is expected to open over 7% higher after activist investor Barrington Capital Group pushes the firm to alter its board. Victoria secrets has underperformed its competitors and lost over 2.4 billion in shareholder value since its spin-off in 2021 from L Brands its former parent company.

While stocks such as Exxon mobile which benefited from surging oil prices last week are set to open modestly lower tracking oil prices southwards.

S&P 500 forecast – technical analysis.

The S&P500’s recovery ran into resistance at 6043 last week before easing lower and finding support at the 20 SMA at 5940, which has been guiding the price higher.. The price has recovered slightly and is testing the 6000 resistance. Buyers will look to close above 6000 and extend gains towards 6130 and fresh record highs. Support can be seen at 5940, with a break below here opening the door to horizontal support at 5860. A break below here exposes the 200 SMA at 5820.

FX markets – USD falls, EUR/USD rises

The USD is falling, extending losses from last week, and amid an improved market mood and owing to higher hopes of Fed easing, which are also adding pressure to the USD ahead of this week's FOMC rate decision.

The EUR/USD is rising towards 1.16, benefiting from a weaker USD. Eurozone economic calendar is quiet. Bundesbank President Nagel said that the ECB shouldn’t rush into further rate cuts. He also predicted that Germany would return to growth later this year.

GBP/USD is unchanged at the start of the week despite U.S. dollar weakness. This week is busy for the pair with the Federal Reserve and the BoE monetary policy decisions on Wednesday and Thursday, respectively. Both are expected to leave rates unchanged.

Oil falls as supply unaffected in Middle East conflict

Oil prices experienced A volatile open on Monday, jumping by 4% before giving back their gains and more as attention remains focused on the Middle East.

While conflicts in the Middle East continue, oil production and export facilities are unaffected, and there hasn't been any effort by Iran to impair flows through the Strait of Hormuz. Around 1/5 of the world's total oil consumption passes through the Strait

The market will remain fixed on how the conflict escalates around energy flows, which could increase the risk premium on oil prices. Goldman Sachs forecast oil prices jumping to $90.00 a barrel should Iran’s supply get disrupted.

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