S&P 500 Set for Fourth Consecutive Week of Losses
The Strait of Hormuz remains closed as oil prices rise and the stock market falls this week, but things could change soon.
Quick overview
- Oil prices have begun to climb again, contributing to a decline in stock prices and pushing the S&P 500 toward its fourth consecutive losing week.
- The ongoing conflict in Iran has severely impacted oil transportation and production, leading to increased prices for West Texas Intermediate and Brent crude oil.
- The stock market is currently experiencing a quadruple witching event, resulting in high trade volume and increased volatility.
- Analysts believe that the reopening of the Strait of Hormuz is crucial for the stock market to regain momentum and potentially reach record highs again.
Oil prices reversed and began climbing again on Friday, forcing stocks lower and pushing the S&P 500 index toward its fourth consecutive losing week.
The selling pressure for the oil market eased slightly on Thursday after Israeli Prime Minister Benjamin Netanyahu said Israel was working with the United States to keep the Strait of Hormuz open. He said there may be an end to the conflict sooner than expected, but as the market opened on Friday, oil prices jumped while stock prices fell.
The Dow dropped 1.2% on Friday in early trading while the S&P 500 fell 0.4%. The Nasdaq Composite stayed mostly flat with a decline of just 0.1%. Now, the S&P 500 is looking at its fourth week in a row of losses, caused primarily by the fighting in Iran but also by apex fears for leading technology companies.
The Strait of Hormuz Needs to Open for Stocks to Climb
Iran has now been fighting with the United States and Israel for nearly three weeks, pulling in Qatar and other countries in the area with missile strikes. The conflict has also seriously hampered the transportation and production of oil and gas around the world.
West Texas Intermediate futures climbed 0.7% and nearly hit $97 per barrel. Brent crude oil futures rose 1.7% Friday and reached $110 per barrel. Those prices may continue to rise as the conflict continues, and that could also keep pressing stock futures lower as consumers fear economic tightening.
On Friday, the stock market is facing a quadruple witching event. This is a period when index options, stock options, single-stock futures, and index futures all expire at the same time, and it happens four times each year. The result is usually high trade volume and quick shifts in momentum that lead to increased volatility.
Investors are looking for the Strait of Hormuz to open again and for shipping to resume in the region. That is the major deciding factor that will allow the stock market to regain its upward momentum from earlier in the year and for indices to start to hit the record highs that they were enjoying back in February. Some analysts predict that the Strait will reopen in a few weeks and that the market will not have to wait months for this to happen. That is Scott Wren’s prediction, and the Wells Fargo global market strategist says that the Strait is the one factor that near-term action is counting on.
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