US Seeks to Boost Crude Oil Supply, Oil Prices Decline—Market Dynamics Overview

Investing.com - Futures linked to major U.S. stock indexes generally rose on Friday as U.S. and Israeli leaders attempted to ease market concerns over a potential prolonged conflict with Iran.

1. Futures Generally Rise

On Friday, U.S. stock index futures mostly gained, indicating a possible slight rebound in Wall Street stocks to close out a week overshadowed by fears of war with Iran.

As of 04:58 AM Eastern Time (17:58 Beijing Time), Dow futures were up 48 points, or 0.1%, S&P 500 futures rose 3 points, or 0.1%, and Nasdaq 100 futures fell 14 points, or 0.1%.

The major indexes declined in the previous trading session, weighed down by soaring energy prices and warnings from the Federal Reserve about persistent inflation pressures.

After Israel launched an attack on South Pars (part of Iran’s section of the world’s largest natural gas field), Tehran retaliated with strikes on key Middle Eastern energy infrastructure, including a major natural gas production center in Qatar.

Brent crude oil prices surged to around $119 per barrel, and European benchmark natural gas prices also rose sharply.

As the U.S. and Israel signaled they would not conduct further strikes on South Pars, markets rebounded from lows, and oil prices retreated from highs. The White House also outlined plans to ease energy market pressures, hinting at possible sanctions relief on some Iranian oil.

Despite this, the Federal Reserve, European Central Bank, Bank of England, Swiss National Bank, and Bank of Japan all kept interest rates unchanged this week, with policymakers choosing to spend more time assessing the impact of the conflict.

2. U.S. Takes Measures to Stabilize Markets

As investors brace for a turbulent week, President Donald Trump attempted to bring some calm to the markets on Thursday.

Trump pledged to take all necessary measures to help de-escalate the crisis and assured Americans that “it will be over soon.”

He also stated there are no plans to deploy ground troops, though unpredictable Trump said when asked about possible deployment of land forces, “Even if I had that plan, I wouldn’t tell you.”

Meanwhile, the Pentagon announced it has requested $200 billion in war funding from the White House, highlighting the costs of this controversial campaign that has sparked division in U.S. public opinion.

3. Oil Prices Retreat but Remain High

However, analysts say that only a complete reopening of the Strait of Hormuz can alleviate long-term supply concerns.

The Strait of Hormuz, a critical shipping choke point in southern Iran, has effectively been closed due to Middle Eastern bombings. Iran has threatened to attack ships attempting to pass through the strait, which could carry cargo beneficial to the U.S. or its allies.

Container shipping companies are concerned about crew safety and find it difficult to insure voyages through this narrow waterway, leading to reluctance to send ships into the strait. As a result, key oil supplies are trapped, causing production backlogs and pushing up crude prices.

Recently, the U.S. launched powerful bombings on Iranian missile bases along the Strait of Hormuz, but some analysts suggest that land intervention—or a complete end to hostilities—may be the only way to ease Tehran’s control over the strait.

Even if the passage reopens, some economists worry that severe damage to other Middle Eastern oil infrastructure could have lasting impacts on the global economy.

Brent crude oil rose 0.3% to $109.06 per barrel. Before the conflict, the contract traded around $70 per barrel.

4. Gold Rebounds

Gold prices rebounded but still posted significant losses this week, as the U.S.-Israel conflict with Iran heightened inflation expectations and weakened bets on rate cuts.

After several major central banks expressed caution about the inflationary effects of the Iran war, gold plummeted on Thursday. This further fueled expectations that rate cuts are unlikely in the near term—an unfavorable outlook for precious metals.

Gold found some support from a decline in the dollar, which posted its first weekly decline in three weeks. Following signals from several central banks planning to raise interest rates to counter rising energy prices, the dollar underperformed compared to other major currencies.

5. Fed Express Says Iran War Did Not Affect Jet Fuel Supply — Reuters

FedEx raised its full-year profit outlook after delivering better-than-expected third-quarter earnings and revenue, driven by strong demand during key holiday periods.

Notably, the company said its forecast does not include any additional disruptions from geopolitical turmoil, but it pointed out that increased air freight costs and rerouted routes caused by the Iran conflict could impact this quarter’s results.

While FedEx may be forced to raise customer charges to offset soaring fuel costs caused by the conflict, such measures could reduce consumer shipping spending.

However, CFO John Ditrich told Reuters that FedEx has not seen jet fuel supplies affected by the fighting.

FedEx shares rose more than 9% in pre-market trading in the U.S.

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