Oil prices fall over 1%, stocks rise as fears of wider Middle East conflict ease

LONDON: Stocks rose and oil prices retreated Monday as fears of a wider Middle East conflict eased even as Israel and Iran pounded each other with missiles for a fourth day.

The dollar and safe-haven gold declined slightly.“As things stand, investors seem less fearful than they were going into the weekend of the possibility that the war between Israel and Iran spreads across the Middle East, and beyond,” said David Morrison, senior market analyst at financial services provider Trade Nation.

“It appears that most of the Israeli airstrikes and missile launches avoided the most significant parts of Iran’s energy infrastructure. And so far Iran’s retaliation has done relatively little damage,” he added.Wall Street opened in the green, with the tech-heavy Nasdaq up around one percent in early deals, while London, Paris and Frankfurt were all higher in afternoon trading.

That tracked gains in Asia, where Tokyo closed up 1.3 percent, boosted by a weaker yen, while Hong Kong and Shanghai also advanced.Israel’s surprise strike against Iranian military and nuclear sites on Friday -- killing top commanders and scientists -- sent crude prices soaring as much as 13 per cent at one point on fears about supplies from the region.

However, concerns over the conflict spreading appeared to have eased, with both main oil contracts retreating by more than 1.0 per cent on Monday.Analysts said the recent decision by the OPEC+ group of crude producing nations, led by Saudi Arabia and Russia, to raise output again in July also played a role.

“Financial markets are very good at absorbing geopolitical risk, and OPEC+’s supply boost is also helping to cushion the blow,” said Kathleen Brooks, research director at trading group XTB.

“There may need to be a major escalation in the conflict before we get another sharp upswing in oil and gold prices,” she added.Analysts had warned that the spike could send inflation surging globally again, dealing a blow to long-running efforts by governments and central banks to get it under control.

Investors were gearing up for monetary policy decisions this week from the US Federal Reserve, Bank of England and Bank of Japan.All are expected to stand pat but traders will be keeping a close watch on their statements for clues on interest-rate outlooks, with US officials under pressure from President Donald Trump to cut borrowing costs.

There was little major reaction to data showing China’s factory output grew slower than expected last month as trade war pressures bit, while retail sales topped forecasts.Also in focus is the G7 summit in the Canadian Rockies, which kicked off Sunday, where the Middle East crisis will be discussed along with trade after Trump’s tariff blitz.

In corporate news, shares in Nippon Steel rose more than 3.0 per cent in Tokyo after Trump on Friday signed an executive order approving its $14.9 billion merger with US Steel, bringing an end to the long-running saga.

Shares in Gucci owner Kering climbed over 11 per cent in Paris on reports that the outgoing boss of French automaker Renault would take over as chief executive of the struggling luxury group.Renault shares shed almost 8.0 per cent, following its announcement on Sunday that Luca de Meo would step down in July.