Stock markets continued to dismiss the severity of the Iran war. The S&P 500 (SPY) added 26 bps to start this week. Alphabet (GOOG), Amazon (AMZN), Micron (MU), and Tesla (TSLA) led the advance. Still, gas prices in the U.S. and around the world continued to soar.
In the U.S., gas prices on average exceeded $3.75. This is a price not seen since October 2023. The economy will feel the effects of gas prices. Transportation, chemicals, fertilizers, and other input costs will rise, since gas prices directly or indirectly influence them.
Despite the spike, stock markets are calm. The U.S. has around 28.5 days of oil in its inventories. That would mean Iran’s military would need to disrupt the Strait of Hormuz for nearly a month in total, if it wants to maximize damage to the global economy.
This afternoon, markets will turn their attention to the Federal Reserve. The central bank will announce its rate decision, where markets widely expect rates to stay the same. Bond prices trended higher ahead of the meeting. TLT stock added around $0.50 to close at $87.45. The 7-10 year treasury bond ETF (IEF) also rose.
Bank stocks bounced back in the last few sessions, too. JPMorgan Chase (JPM) and Goldman Sachs (GS) added a few points. That small rebound is not enough to erase the 9%-10% quarterly decline. If gas prices keep rising, watch out for bank stocks continuing their downtrend.
