Nasdaq 100 Jumps and Crude Oil Plunges as Israel-Iran Chapter Closes

Also, 10-year T-note, gold, crude oil, and Japanese yen futures

1. Nasdaq 100 E-mini futures (/ES): +0.72% 
2. 10-year T-note futures (/ZN): 0% 
3. Gold futures (/GC): -0.2% 
4. Crude oil futures (/CL): -6.38% 
5. Japanese yen futures (/6J): -0.32% 
   

Shortly after markets in New York closed for the week on Friday, Israel launched the long-awaited response to the Iranian missile strike of Oct. 1. As the dust settled in Iran on Saturday morning, it became clear no key civilian or energy infrastructure was damaged, and ensuing statements by the Ayatollah suggested no further escalation would transpire. That’s been good news for risk appetite, with U.S. equity markets pushing higher at the open and holding those gains. Bonds have seesawed between aggressive losses to trading back to breakeven, while the energy market is in disarray now that geopolitical risk premia is evaporating.  

Nasdaq contracts(/NQZ4) led U.S. equity futures higher to start the week, rising about 0.72% ahead of the opening bell. Traders are giddy for a big week of earnings that include several high-profile tech names. Advanced Micro Devices (AMD) and Alphabet (GOOGL) will report earnings after the close tomorrow. Then we get Microsoft (MSFT) and Meta (META) on Wednesday after the close. On Thursday afternoon, we’ll see results from Amazon (AMZN), Intel (INTC) and Apple (AAPL) cross the wires. However, with excitement comes the possibility of disappointment. It could be a decisive week for the market as we head deeper into the fourth quarter. 

It’s a big week for Treasuries ahead of the Treasury Department’s quarterly refunding announcement due on Wednesday. Traders expect that the refunding auctions will cross the wires at $125 billion, which would mark the third straight quarter unchanged. However, if the market is surprised with an increase in bond auctions, it could inject a bit more volatility. Neither candidate former President Donald Trump nor Vice President Kamala Harris is expected to reduce deficit spending, and 10-year note auctions have already seen record sizes. The week is starting off with little change across the curve, as traders gear up for a big week of corporate earnings.  

A pullback in the dollar offered little help to gold prices to start the week, with contracts (/GCZ4) nearly unchanged this morning. Geopolitical tensions eased slightly after Israel attacked military targets in Iran, foregoing an attack on the country’s oil infrastructure. Still, precious metals are primed for higher ground, especially as the U.S. election approaches.  

Crude oil futures (/CLZ4) plummeted this morning, with prices down over 6% ahead of the New York open. The drop is already the biggest since July 2022. Traders sold the commodity after Israel launched attacks in Iran against military targets. Traders previously feared that Iran’s oil infrastructure would be targeted, potentially affecting over 3 million barrels per day of production. 

Japanese yen futures (/6JZ4) fell to a fresh three-month low to start the week following a snap election in Japan. Traders are weighing how losses for the Liberal Democratic Party will impact the currency in the future. Later this week, the bank of Japan will announce an interest rate decision, with traders expecting the Bank of Japan to hold rates steady. The currency remains one of the worst performers this year, and the upcoming decision is unlikely to change its course over the short term. 

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts #Overtime, Monday-Thursday. @cvecchiofx
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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