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Oil prices rise as investors question the outcome of US-Iran Peace Talks
Investors questioned the prospects of a breakthrough at the U.S.-Iran talks. The two sides are still at odds over Tehran's uranium stocks and the Strait of Hormuz. The market is still headed for a loss this week. According to a senior Iranian source, no agreement has been made with the United States. The gaps are narrowing, but Secretary of State Marco Rubio stated that there have been "some positive signs" in negotiations. However, any toll system on the Strait would be unacceptable. Brent crude futures rose by $2.38 or 2.3% to $104.96 a barge at 0034 GMT. U.S. West Texas intermediate futures gained $1.73 or 1.8% to $98.08. Both benchmarks?declined around 2% on Friday to their lowest closings in almost two weeks. Oil prices are on the rise as oil supply disruptions and Middle East instabilities linked to Strait of Hormuz continue, according to Satoru Yushida, commodity analyst at Rakuten Securities. He added that "WTI will likely remain in the $90-$110 price range next week as it has done for most of March." The war has not progressed much in the six weeks since the fragile ceasefire was declared. Meanwhile, the high oil prices have fueled concerns about inflation and the global economy. Before the war, around 20% of the world's energy supply passed through the Strait. This has resulted in the removal of?14,000,000 barrels of oil per day - 14% of the global supply. Even if the conflict ends now, full oil flows through Strait will not return until the first or second quarter in 2027. Four sources say that seven of the top OPEC+ countries will likely agree on a modest increase in July production when they meet June 7. However, delivery is still disrupted for many due to the Iran War. Reporting by Yuka obayashi, Editing by Nia wilson and Sonali paul
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Can Wall Street's boom ease workers' suffering? McGeever
The gains from Wall Street are not evenly distributed among the majority of U.S. household owners, but they are increasing. This broad, but concentrated equity ownership becomes more significant as the U.S. workers share of GDP plummets and concerns about an AI-induced "jobpocalypse". Can the "wealth effect" - where people feel richer and spend more when asset prices increase - offset other, more challenging economic forces that are affecting the average Joe's life? Wall Street has never been more important to the financial fortunes and success of Americans. Over 60% of American households either directly or inadvertently own stocks. A record third of the total assets of U.S. household is invested in stocks. Wall Street is still booming, thanks to artificial intelligence. The net U.S. house value as a percent of personal disposable income is at its highest level ever, even if you exclude the pandemic distortions in 2021 and 2022. Why, then, is consumer confidence at an all-time low, according to some of the most closely monitored measures? EXTREME CONCENTRATION Part of the answer is that wealth effects are not evenly distributed. The richest 10% of Americans own 90% of all U.S. equity. Even more concentrated is the wealth at the top. Half of the stock market wealth of the United States is owned by the richest 1%. The vast equity hoard of the wealthy is distorting the overall picture, and is helping to "entrench" the "K-shaped economy", where the wealthy are prospering while the rest is suffering. In fact, workers are lagging behind in several ways. Bureau of Labor Statistics data shows that U.S. worker's share of output is at a record low 54.1%. The Bureau of Labor Statistics figures show that U.S. workers' share of output has dropped to a record-low 54.1%. It's no surprise that American consumers are watching their wallets closely, despite what is happening on Wall Street. In fact, the earnings reports and outlooks of some of the biggest U.S. retailers indicate that there is a shift underway in U.S. consumer spending patterns - and mainly downwards. Home Depot expects demand to remain volatile as customers scale back on major home improvements. Lowe's, a rival home improvement chain, also indicated a tightening of spending due to sluggish housing markets. TJX, parent company of discount retailer TJ Maxx has raised its outlook, a sign that more consumers who are cost-conscious are moving to TJX's stores and away from its more expensive competitors. Walmart has maintained its conservative sales and profit targets as fuel prices continue to rise, driving shoppers towards its low-priced essentials and groceries. Has the "wealth" effect become a luxury? WORKERS SHRINK THE SHARE OF PIE It may have, but it can still keep the economy in general humming. Credit Insights analysts believe that the wealth effect acts as an "economic and political narrative offset" for the current doom that is weighing heavily on large segments of U.S. consumer. Bank of America also seems optimistic. They argue that stocks would need to be in a "sustained decline" to slow spending by higher-income earners and to?effectively shut the 'K,' from the 'K shaped' economy? via negative wealth effects. Remember that wealthy Americans are responsible for a large portion of the total U.S. consumer spending. Generali Asset Management's research, however, strikes a cautionary note. It was published even before the Iran War sent energy prices skyrocketing. Generali strategists claim that because equity ownership is concentrated among older and wealthier households, and since much of their discretionary spending is discretionary, consumption growth driven by positive wealth effects is likely to be narrower and more sensitive than it was in the past. The models show that a 8% drop in the stock markets would reduce GDP by 0.4%. "The actual impact is likely to be greater given the current over-representation of wealth effects." Stock market boom has proven to be a false alarm about the 'demise of U.S. consumers all year. Wall Street will have a lot of work to do, given the 'heavy lifting ahead. You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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US delays the closure of two fossil-fuelled power plants in Pennsylvania
The Trump administration further delayed on Thursday the planned closure of Units 3 and 4, at the Eddystone fossil fuel-fired power generation generating station in Pennsylvania, by ordering Constellation Energy Corp. to continue operations beyond the shutdown date. Energy Secretary Chris Wright issued an emergency order directing PJM interconnection, the largest power grid in 'North America to work with Constellation Energy in order to ensure 'the two units are operational and to minimize costs for American people, the?Energy Department said in a press release. Wright stated that "energy sources which perform at their peak are the most valuable." This is why oil and natural gas were so valuable during the past year's events of maximum capacity. Donald Trump's administration used emergency powers in order to keep older coal and gas fired power plants running beyond their planned retirement dates. The reason given was a concern about the reliability of the grid. Trump wants to increase government support for fossil-fuels and maximize the output of these fuels in the United States. The country is the top oil and gas producer in the world. Wright first ordered the two Eddystone units to remain operational past their planned retirement date of the end of 'May 2025. He issued subsequent orders in 2025 and 2026. The Eddystone units will remain online until August 22, 2026, thanks to the latest order placed on Thursday.
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Oil prices fall, but stocks rise as investors look forward to progress in Iran War Talks
Investors were hopeful about possible progress in the Middle East peace talks on Thursday, even though the U.S. remained opposed to Iran's uranium stockpiles and its control over the Strait of Hormuz. The gap between the U.S. and Iran has narrowed according to a senior Iranian source. Marco Rubio, the U.S. secretary of state, said that there have been "some positive signs" during the talks. However, any toll in the Strait would not be acceptable. U.S. president Donald Trump stated that the U.S. would eventually recover Iran's highly enriched stockpile. The oil prices were higher in the morning, but the major U.S. indexes fell after reports that Iran's supreme ruler had issued a directive to prevent the export of the country's near weapons-grade uranium. Treasury yields in the U.S. fell in the afternoon on hopes that a peace deal would be reached. The yield of the benchmark 10-year Treasury Note was down 0.8 basis point on the day to 4.575%. On Tuesday, it reached its highest level since January 2025. The war that began on 28 February has caused energy prices to soar and raised concerns about inflation and consumer spending. U.S. crude dropped $1.91 and settled at $96.35. Brent fell $2.44 to settle at $102.58. Adam Sarhan, CEO of 50 Park Investments, New York, said, "Oil has dropped below $100 and that is a good thing." Sarhan also said that investors have been optimistic about the future of stocks, especially in technology. Nvidia shares, the largest company in the world by market cap, finished down 1.8%, as investors retreated after recent gains. Nvidia announced a $80 billion share purchase program late Wednesday. The company reported earnings that exceeded Wall Street expectations. The Dow Jones Industrial Average increased by 276.31 points or 0.55% to 50,285.66, while the S&P 500 gained 12.75 points or 0.17% to 7,445.72; and the Nasdaq Composite grew 22.74 points or 0.09% to 26,293.10. The MSCI index of global stocks rose by 5.24 points or 0.48% to 1,106.89. The pan-European STOXX 600 finished with a gain of 0.04%. IBM shares rose 12.4% following news that the Trump Administration will fund a few quantum computing companies including a new IBM Venture in exchange for stakes. D-Wave Quantum shares and other quantum computing companies also soared. Rick Meckler of Cherry Lane Investments said, "If you look at the normal economic climate surrounding this market, then you'd expect the stocks to be lower. But if you think the war is going to end soon, and that energy prices are at a temporary peak, then you should consider not only the good earnings, but also the potential earnings from AI." SpaceX filed its IPO late on Wednesday. This gave the market their first look at how much Elon Musk spends on AI. He is betting on transforming SpaceX into a broader AI business. Investors also watched developments in 'Turkey. The trading on Turkey's stock exchange was temporarily suspended after steep falls, and government bonds were also impacted after a ruling by one of the top courts in the country dealt the latest blow against the main political opponent party. The court ruled that the Republican People's Party's congress of 2023, at which Ozgur Ozel was elected, should be annulled. The U.S. traded iShares MSCI Turkey Exchange-Traded Fund was?down by 9.2%. Dollar index was flat on Thursday evening as traders assessed the chances of a short-term agreement to end the war. The index had earlier reached a six-week-high. The dollar index (which measures the greenback versus a basket including the yen, the euro and other currencies) was flat on the day, at 99.13. Meanwhile, the euro fell 0.03% to $1.1624. Gold spot fell 0.04%, to $4541.79 per ounce. (Reporting from Caroline Valetkevitch and Harry Robertson, in New York, and Gregor Stuart Hunter, in London, with additional reporting by Gregor Stuart Hunter, in Singapore, and editing by Alex Richardson and Chizu Nomiyama; Will Dunham, Chris Reese, and Alex Richardson)
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Perpetua Resources secured a $2.9 billion loan to fund Idaho antimony and Gold Mine
Perpetua Resources, a gold and antimony miner in Idaho, announced that the board of the Export-Import Bank of the United States approved a $2.9 Billion?loan for the development of the Stibnite Gold Project. According to the current capital cost estimates, the EXIM funding, provided under the "Make More in America Initiative", along with the cash available in the company, should be sufficient to finance the direct construction. The Pentagon-backed project would be the first antimony mine in the country. It has an estimated 148'million pounds' of metal that is used to make?bullets, tanks and alloys for batteries in electric vehicles. Perpetua was approved by the United States to start construction on the Stibnite Project last year, after China, which is the world's biggest antimony miner, and processor, had blocked exports of the critical mineral into the United States. The Trump administration is stepping up its efforts to increase domestic production of "critical minerals" and to raise government funding to counter China's near total control of the sector. Perpetua’s mine will?supply more than 35% of America's antimony annual needs by the time it opens in 2028. It will also?produce?450,000 ounces?of gold each year. The company anticipates that the EXIM loan will be available during the second half 2026.
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Oil prices fall, but stocks are mostly up as investors look forward to progress in Iran War Talks
Investors weighed the prospects of progress between the United States, Iran and their war to end the talks. Oil prices dropped and U.S. stock markets were mixed on Thursday. The oil prices were higher in the morning, and major U.S. stocks also rose. Stock indices fell after reports that Iran's supreme ruler had issued a directive not to export the country's near weapons-grade uranium. This was a hard-line stance against a main demand from the United States. The order by Iran's Supreme Leader Ayatollah Khamenei could complicate the talks to end the Iran War, and make the conflict that began on February 28, which has seen energy prices soar, even longer. Israeli officials claim that Donald Trump assured Israel that Iran’s stockpiles of "highly enriched" uranium would be destroyed and that any deal to end the conflict must include this demand. U.S. crude dropped $1.91 and settled at $96.35. Brent fell $2.44 to settle at $102.58. Adam Sarhan, CEO of 50 Park Investments, New York, said, "Oil has dropped below $100 and that is a good sign." Sarhan also said that investors remain optimistic about the outlook of stocks. Nvidia shares, the largest company in the world by market cap, fell last week 1.4%, but they are still off their lows. Nvidia announced a $80 billion share purchase program late Wednesday. Investors also watched developments in Turkey. The trading on Turkey's stock market temporarily halted due to a sharp fall, and government bonds also fell after the top court of the country dealt the latest blow against the main political party. The court annulled the Republican People's Party Congress in 2023, at which its Chairman, Ozgur Ozzel, was chosen. Last week, the U.S. traded iShares MSCI Turkey Exchange-Traded Fund fell 9%. On the Treasury market the yield on the benchmark U.S. 10 year notes increased 0.6 basis points from 4.57% at the end of Wednesday. The Dow Jones Industrial Average rose by 270.24 or 0.54% to 50,279.59. The?S&P500 rose by 7.70 or 0.10% to 7,440.67. And the Nasdaq Composite dropped 6.15 or 0.02% to 26,264.21. "When you consider the normal economic climate surrounding this market, it is reasonable to expect that (stocks) would be lower. However, if you believe that the war will end soon, and that energy prices are at a temporary peak, then you should look beyond the good earnings, to the potential earnings from AI," Rick Meckler said, Cherry Lane Investments partner. SpaceX filed its IPO late Wednesday night, giving investors their first look at how much Elon Musk is spending on AI to transform the rocket manufacturer into a broader AI business. MSCI's global stock index rose by 5.26 points or 0.48% to 1,106.91. The pan-European STOXX 600 rose by 0.04%. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and others) rose by 0.26%, reaching 99.39. Meanwhile, the euro fell 0.3%, at $1.1592. The dollar gained 0.18% against the Japanese yen to reach 159.19. Spot gold dropped 0.17%, to $4,535.68 an ounce. (Reporting from Caroline Valetkevitch and Harry Robertson, in New York, and Gregor Stuart Hunter, in London, with additional reporting by Gregor Stuart Hunter, in Singapore, and editing by Alex Richardson and Chizu Nomiyama; Will Dunham, Chris Reese, and Will Dunham)
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Brazil April tax revenues surge to record levels as oil windfalls boost Lula's coffers
Brazil's federation tax revenues surged in April according to a report released on Thursday. The increase was attributed to higher oleo-related receipts, as the elevated oleo-price linked to the U.S./Israel war against Iran lifted government intake. Total revenue was 278.823 reais ($55.86billion), an increase of 7.82% over a year ago in real terms. This is a record month and follows a pattern that has been repeated in "every month" this year. The federal'revenue service' grew tax revenue by 7.31 percent in real terms during April. Meanwhile, receipts from?other agencies -- mainly oil royalties -- jumped by 14.89 percent. Latin America's biggest economy, as a net oil exporter, has expected higher revenues amid the commodity price volatility linked to the Middle East conflict. The revenue service reported that tax payments for "oil and gas extraction" rose 541% compared to the same month a year ago. This was the biggest percentage increase of all industries. As a result of April's performance, the government attributed it to a stronger corporate income tax collection, increased social security revenues and higher taxes on fixed income investments. Lula’s?government is seeking to improve the?public finances primarily through increased revenue after raising taxes and reducing tax breaks. Tax revenue for the year to date was up 5.41%, in real terms, and reached 1.06 trillion reais. This is also a record. $1 = 4.9915 reais (Reporting and editing by Chris Reese, Alistair Bell).
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China's oil imports cut and US exports increase wrongfoot the market bulls
Analysts and traders alike predicted a market Armageddon if U.S. - Iran war continued and the Strait of Hormuz remained closed. Five weeks after the peace talks stalled and the strait remained largely closed, oil prices did not rise but instead fell to between $100-$110 per barrel. This fall was caused by several factors: Chinese refiners reduced refining and imports, and used crude oil from their tanks instead. The United States' refiners, traders and producers exported more fuel and oil to the global market to fill the supply gap from the Middle East. The Strait of Hormuz was the route of around 20% of the world's energy before the war. Since then, 14 million barrels of oil per day - 14% of the global supply – have been removed from the market by suppliers like Saudi Arabia, Iraq and Kuwait. The war has caused inflation, slowed down the global economy, and led to demand destruction when high oil prices cause consumers to reduce purchases. Ole Hansen, analyst at Saxo Bank, said: "The fact that the prices are still relatively low, despite what's arguably the biggest supply disruption in history, indicates that demand destruction has been stronger and wider than expected." According to General Index data, the premium for Middle Eastern crude grades Oman Dubai and Murban to Dubai benchmark was around $9 per barrel this week. This is down from the record-high premium of over $65.50 per barrel that occurred in March. This gave an outright price of $104 per barrel. It was down from almost $170 per barrel in late March. On May 15, the price of U.S. Permian quality?crude sold at the Magellan East Houston terminal (MEH), fell to a $1.20 per barrel premium over U.S. crude oil futures, in line with levels before World War II. U.S. Mars Sour, the flagship U.S. offshore grade, traded at a $4 per barrel premium to U.S. crude futures on May 15, down from a 6-year high of $17.50 in April. U.S. crude oil exports to Europe also weigh on grades in the Atlantic basin. North Sea Forties crude traded on May 12 at a slight discount to Brent dated, compared with an all-time high $21.50 premium. Before the start of the conflict on February 28, crude oil benchmarks like Dubai and 'Dated Brent' were hovering at around $70 per barrel. CHINA REFINES LESS, USES STOCKSPILES Morgan Stanley analysts said in a recent note that the Chinese oil industry has responded to the crisis with a remarkable response. Chinese refiners cut production by nearly a fifth compared to pre-war levels, to 8.4 million barrels per day. They did this either by bringing up scheduled maintenance dates or by cutting fuel runs. The bank reported that China's net imports of crude oil by sea fell from a year ago to 8.5 millions bpd, or 5.5%. Chinese refiners resold the cargoes that they bought under long-term agreements to refiners outside of China - a rare occurrence - due to low domestic fuel demand and high oil prices, which made resales profitable. Oil imports in Asia, which accounts for 37% of the world's refining production, fell to their lowest level in 10 years last April, as refiners processed stocks that were accumulated before the war at lower prices. Energy Aspects' data shows that Asian crude processing is expected to drop by 5.6% in May to 28,7 million bpd from March. The International Energy Agency reported that global oil inventories dropped at a record rate of 246 millions barrels between March and April as refiners processed more oil to avoid higher prices on an "undersupplied" market. OECD Asia &?Oceania crude stock levels fell 12% in May to 451'million barrels from their pre-war February levels, according to Energy Aspects. No one wants to pay more for the next barrel. Energy Aspects analyst George Dix stated that everyone is waiting with hope but eventually all of these stocks will run out. U.S. Exports Hit Records Producers and traders have increased exports of the United States. The United States is the largest oil producer in the world. U.S. exports have also surpassed records. The U.S. has sold 133,000,000 barrels of its Strategic Petroleum Reserve. According to the Energy Information Administration, U.S. crude and fuel exports rose from 11.2 to 13 million barrels per day in the first two week of May. Kpler data shows that crude oil exports from the SPR were around 308,000 bpd last April, and 281,000 bpd this month. Analysts warn that the lower prices are not sustainable and stocks will drop to minimal levels if Hormuz doesn't reopen within a couple of months. Aldo spanjer, BNP Paribas' analyst, says that refiners will have to resume purchasing to supply fuel markets, and this would cause prices to rise again. The market is resilient, but it's running on its inventories as it waits for a breakthrough in Hormuz, said Adi Imsirovic. He is a senior associate non-resident at the Center for Strategic and International Studies and an experienced oil trader.
Dollar at a six-week high, stocks rise as US-Iran talks remain the focus
The?U.S. dollar rose to six-week highs on Friday, while Asian stocks also gained. The dollar was near its six-week highs, and oil prices were swayed by investors who held on to hope of a breakthrough in U.S.Iran peace negotiations.
Investors are worried about the possible closure of the Strait of Hormuz. This is a vital artery that supplies energy to the world. It has caused oil prices to soar and changed the outlook for global interest rates due inflationary fears.
Marco Rubio, the U.S. Secretary for State, said that there were "some positive signs" in the talks to end the three-month old war in the Middle East. However differences still remain regarding Tehran's stockpile of uranium and the control over the waterway.
On the stock market, MSCI?s broadest index of Asia-Pacific stocks outside Japan rose 0.3%, resulting in a modest rise for the week. Japan's Nikkei gained 2%.
U.S. stock futures increased by 0.2%, while European futures gained by 0.8%.
Chris Weston, Pepperstone's head of research, says that it feels like the news is moving towards tangible items that markets can price with more conviction.
Weston warned that "although confidence levels are not particularly high, they still remain low."
The oil prices rose on Friday morning after a sharp drop as investors were left guessing by conflicting messages about the talks. Oil prices are still well above their pre-war level, and will remain there even if the talks end.
Brent crude futures were up 2% at $104.71 per barrel, but are set to drop 6% in the coming week. U.S. West Texas Intermediate Futures rose 1.66% to $98.01.
As the war drags out, the prolonged energy disruptions will have a ripple effect on prices around the world. This will cause traders to price rate increases in both developed and emerging markets.
The markets are pricing in rate increases from the U.S. Federal Reserve before the end of this year, compared to expectations of two 'rate cuts? before the war.
Mitch Reznick is the Head of Fixed Income for Federated Hermes. He said: "We are seeing a very strong correlation between oil prices, global rates and how wide-ranging and borderless this shock now has become."
"What at first appeared to be a change in inflation expectations now feeds?directly? into actual inflation, reinforcing that central banks need to maintain tighter policy for longer to restore the price stability."
This has boosted Treasury yields, and the dollar also benefits from demand for safe-haven assets. Early trading saw the euro at $1.1614, which is close to its six-week low, hit on Thursday. This means that it will drop by 1% this month.
The dollar stood at 99.247 against a basket. Last time, the Japanese yen was worth 159.11 dollars.
Data released on Friday revealed that Japan's core rate of inflation fell to a four-year-low in April. This complicates the Bank of Japan’s path of raising rates. (Reporting by Ankur Banerjee in Singapore; Editing by Kim Coghill)
(source: Reuters)