Global Stocks Gain on Higher Oil Prices After Trump's Iran Treaty Decision
New York (May 9) Global stocks powered ahead Wednesday, with U.S. and European markets supported by surging energy stocks, as investors reacted to President Donald Trump's decision to withdraw from a multilateral nuclear treaty with Iran and the prospect of several months of rising crude prices.
Wall Street is also looking at solid opening bell gains, with futures contracts tied to the Dow Jones Industrial Average suggesting a 140 point gain to start the session thanks in part to solid pre-market gains for oil producers and industry-related stocks. Futures tied to the S&P 500 are pointing to an 11.5 point gain for the broader benchmark while Nasdaq Composite futures suggest a 29 point gain.
Brent crude contracts for July delivery, the global benchmark, were marked 0.4% higher at $76.90 per barrel while WTI contracts for June, which are more tightly correlated to domestic gasoline prices, were seen 0.645% higher from their Tuesday close in New York and changing hands at $71.02 per barrel, the highest since early December 2014.Domestic oil producers and servicers were also on the rise in pre-market trading, with Transocean Litd ( RIG) rising 1.3% to $12.57 per share and Actions Alerts PLUS holding Schlumberger NV ( SLB) gaining 1.31% to $70.45 each. Exxon Mobil Corp ( XOM) was marked 1.01% higher at $78.88 each while rival Chevron Corp. ( CVX) added 0.3% to change hands at $126.92 a share.
Watch what the Iran deal means to oil prices.
"We will be instituting the highest level of economic sanction," Trump said Tuesday in his White House address. "Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States."
"Today's action sends a critical message. The United States no longer makes empty threats. When I make promises, I keep them," Trump insisted.
Iran, the world's fifth largest crude producer with daily output of 3.8 million barrels, is likely to lose customers for around 500,000 barrels of oil each day, analysts have argued, once the full force of the sanctions kick-in over the next six months.
European markets were also higher on the session, with the Stoxx 600 benchmark adding 0.28% by late morning in Frankfurt and Britain's FTSE 100 rising 0.55% thanks to a solid 2.24% gain for BP plc and 2.43% bump for Royal Dutch Shell plc. RDS.A.
Vodafone Plc (VOD) shares were also on the move, rising 1.41% in London after the world's second-largest wireless carrier agreed a $22 billion deal to buy several European media assets from John Malone's Liberty Global (LBTYA) .
Both markets will once again be supported by weaker domestic currencies, however, as the U.S. dollar index hits fresh 2018 highs of 93.42 in overnight trading, pushing the euro to 1.1855 and the pound to 1.3527 in early European dealing, as well as a 1.94% gain for the Stoxx 600 Oil & Gas sub index.
Overnight in Asia, the region-wide MSCI index managed to eek out a 0.02% gain into the close of the trading day while Japan's benchmark Nikkei 225 fell 0.44% to close at 22,408.88 points.
Toyota Motor Co. (T) shares, however, rose the most in nearly 8 months after it unveiled plans to buy back around $2.7 billion worth of shares Wednesday after the world's biggest carmaker forecast a 15% decline in profits for the coming financial year thanks in part to a stronger yen and ongoing trade rift between Japan and the United States.
The cautious tone reflects investor concern that Trump's largely unilateral decision to walk away from the Iran treaty, which was designed in 2012 to prevent Tehran from developing nuclear weapons in exchange for broader international economic support, will not only disrupt global oil markets but also unsettle the Middle East region and complicate the President's efforts to negotiate workable trade deals and compromises with America's biggest trading partners.
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