Good morning, investors. Stock prices dropped in overnight trading and oil prices ticked higher following the US and Israel’s strike on Iran over the weekend.

The tumult arrives days ahead of a key retail sales report and fresh jobs data, as well as multiple speeches from Federal Reserve officials.

Let’s get to the news.

Crude moves

The conflict in Iran is already pushing oil prices higher but that doesn’t mean a drawn out supply shock is coming for markets.

Crude surged double digits in overnight trading, but the move looks more like a risk premium than evidence of missing barrels.

Unless exports, shipping lanes or Gulf infrastructure takes a meaningful hit, this volatility spike isn’t likely to usher in a new $100-a-barrel oil regime.

Markets are reacting to sudden conflict, not confirmed supply destruction.

Indeed, US crude prices’ fair value is estimated at $67 a barrel, according to Bloomberg Intelligence analysts.

For oil to hold above that level would require more than uncertain headlines.

“Despite geopolitical tension, global inventories remain robust on land and at sea, and the physical market is fairly well supplied,” said Bloomberg Intelligence energy analyst Salih Yilmaz.

That helps explain why the move, while sharp, does not yet resemble a classic supply shock.

Other indicators have not blown out in a way that signals inventory tightness, and the futures curve still implies muted pricing several months ahead.

The market’s baseline appears to be that as real as the escalation risk is, an enduring supply shock is a separate matter.

Without damage to export terminals or damage in the Strait of Hormuz, gravity tends to reassert itself in oil.

That pattern mirrors the broader market response to geopolitical shocks.

The S&P 500 has averaged a 14.2% return in the 12 months following major conflicts since 1950.

Investors — across oil and equities — are prone to quick recalibrations once it becomes clear that fundamentals have not materially changed.

For now, history suggests the surge in crude prices reflects caution and hedging rather than structural scarcity.

The smart money is betting the barrels keep flowing.

📉 Saudi and Egyptian markets slumped amid war turmoil. Stocks in both nations tumbled to start the week following the first signs of the US military action on Iran hitting the region. (Bloomberg)

🛢 OPEC+ will increase its barrels-per-day quota. Conflict in the Middle East could push oil prices sharply higher, a potential outcome that led the oil group to raise its production quote by 220,000 barrels a day. Iran accounts for about 4% of global oil supply. (Yahoo Finance)

🏦 Bonds are still acting like a safety net for war. While Treasury prices haven’t been the safe haven investors expected in recent years, they suddenly look the part with conflict flaring in the Middle East. The classic inverse relationship of bond prices rising as stocks fall is back on. (Barron’s)

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