Wall Street is mixed, oil prices stabilise with war in Iran entering 5th day

Bangkok, Mar 4: Wall Street futures were mixed early Wednesday while oil prices stabilised after President Donald Trump said the US Navy may escort tankers through the Strait of Hormuz, where about a fifth of the world’s oil passes.

Futures for the S&P 500 fell 0.1 per cent before the bell and futures for the Dow Jones Industrial Average slipped 0.2 per cent. Nasdaq futures were essentially unchanged.

Oil prices are up about 11 per cent since the United States and Israel launched an attack on Iran five days ago.

On Tuesday, Trump announced that he had ordered the US Development Finance Corp. to provide political risk insurance and guarantees for financial security of all maritime trade.

“If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible,” Trump said in a social media message posted by the White House.

The price of US benchmark crude oil fell slightly to USD 73.94 per barrel early Wednesday. Brent crude, the international standard, gave up 37 cents and fell to USD 81.03 per barrel.

“Trump’s assurances of the US underwrite shipping insurance against Middle East conflict risks and even US naval escorts only mitigate, but do not eliminate, enduring upside risks to oil prices,” Mizuho Bank said in a commentary.

The increased insurance costs filtering through to shipping would ultimately cost an extra USD 5 to USD 15 a barrel, it said, adding that the ”war premium’ remains firmly intact.”

Worries over the war, which Trump has suggested could last a month or longer, have hammered world markets, unsettling investors who fear more spikes for oil prices may grind down the global economy and sap corporate profits.

“I think the Iran situation is getting out of hand, and I think that US President Donald Trump miscalculated enormously,” said Francis Lun, CEO of Venturesmart Asia. “The situation is very grim.”

Some analysts say stocks could rebound if the war ends soon. If it drags on, higher inflation partly due to rising energy prices could tie the Federal Reserve’s hands and keep it from cutting interest rates.