International Oil Prices Plunge, Pushing U.S. Stocks Higher; Morgan Stanley Chief: Market Adjustment Nearing End

Ask AI · Morgan Stanley Chief Strategist on the Deep Logic Behind the End of the Pullback

Cailian Press, March 17 (Editor: Liu Rui) On Tuesday morning, international oil prices plummeted due to expectations that the blockage in the Strait of Hormuz might ease and that multiple countries could release more crude oil reserves.

As oil prices fell, concerns about inflation eased, with U.S. stocks and bonds both strengthening, leading to a higher open in Asian markets on Tuesday — the Nikkei 225 index opened up 0.9%. Korea’s KOSPI rose 2.9%.

Morgan Stanley’s chief strategist believes that, although there are no clear signs of an end to the war, the market correction in U.S. stocks may be nearing its conclusion.

Are investor concerns about the war easing?

On Monday evening Beijing time, Brent crude futures once dropped over 3%, falling below $100 per barrel; WTI crude futures also fell more than 5%, dropping to $91 per barrel.

However, on Tuesday morning, international oil prices rebounded slightly. By 8 a.m. Beijing time, Brent crude futures gained 2% intraday to $102.22 per barrel, returning above $100. WTI crude futures rose over 2% intraday to $95.47 per barrel.

The movements in oil prices are clearly linked to the Iran conflict situation. On Sunday, U.S. officials revealed that the Pentagon expects the Iran conflict to take 4 to 6 weeks to complete, and the war has now entered its third week.

Yaderni Research reported on Monday that, despite escalating conflicts in the Middle East, financial markets remain relatively calm, indicating that investors expect the war to end soon but remain cautious about further deterioration.

The firm stated, “Overall, energy and financial markets are responding quite calmly to the Middle East conflict.”

It also noted that investors “seem to believe this war will end quickly.”

IEA emphasizes further reserve releases possible

After announcing the largest-ever release of 400 million barrels from strategic reserves, the International Energy Agency (IEA) said on Monday that more oil reserves could still be mobilized if needed.

IEA Executive Director Fatih Birol stated in a televised briefing that the ongoing emergency release would only reduce IEA reserves by about 20%.

“We still have over 1.4 billion barrels in reserves, which means we can take further action if necessary in the future.”

Is the U.S. stock market correction nearing its end?

Although the significant volatility caused by the war has not yet subsided, Morgan Stanley’s chief U.S. equity strategist Michael Wilson believes the current correction in U.S. stocks appears to be nearing its end.

On Monday, Wilson issued a report stating that, while a slight decline in U.S. stocks cannot be ruled out in the short term, “we still believe this correction is close to its conclusion, both in terms of time and price.”

He pointed out that the correction has “matured,” with 50% of stocks in the Russell 3000 index falling at least 20% from their 52-week highs.

He also said that market performance “far exceeds the current obvious risks,” and added that this year’s stock trend resembles early warning signals seen last year. However, he expects the decline to be “significantly smaller than last year,” though volatility may persist due to geopolitical tensions.

Morgan Stanley noted that in the coming weeks, the U.S. stock market could experience significant swings — if the 200-day moving average is broken, the S&P 500 could find support between 6,400 and 6,500, with resistance around 6,850.

Wilson also mentioned that Morgan Stanley is taking profits on small caps and has temporarily adjusted the sector’s rating to neutral.

Despite short-term uncertainties, Morgan Stanley maintains a positive outlook for U.S. stocks over the next 6 to 12 months.

(Cailian Press, Liu Rui)