[New York Stock Market] All Major Indices Rise on Iran's 'Limited Retaliation'... International Oil Prices Plunge Over 7%

Iran Launches Missiles at U.S. Bases in Qatar and Iraq
Advance Notice Given to U.S....A Signal to Avoid Escalation
Fears of Full-Scale War Ease...WTI and Brent Crude Drop 7.2%

All three major indices on the New York Stock Exchange closed higher on June 23 (local time). The upward movement reflected relief that Iran's retaliatory attack in response to last weekend's surprise U.S. airstrike on its nuclear facilities was limited to U.S. military bases in neighboring countries, reducing fears that the conflict would escalate into a full-scale war. International oil prices also plummeted by more than 7% as investors assessed the likelihood of Iran blocking the Strait of Hormuz as low.

Reuters Yonhap News

On this day, the blue-chip Dow Jones Industrial Average closed at 42,581.78, up 374.96 points (0.89%) from the previous trading day. The S&P 500, which focuses on large-cap stocks, rose 57.33 points (0.96%) to close at 6,025.17, while the tech-heavy Nasdaq climbed 183.57 points (0.94%) to finish at 19,630.98.

International oil prices fell by more than 7%. West Texas Intermediate (WTI) dropped $5.33 (7.2%) to $68.51 per barrel, while Brent crude, the global oil price benchmark, plunged $5.53 (7.2%) to $71.48 per barrel.

As Iran's retaliatory attack against the U.S. remained limited, concerns about further escalation in the Middle East eased. On this day, Iran launched about ten missiles at U.S. military bases near Doha, Qatar, and in Iraq. This was in retaliation for the U.S. airstrikes on June 21 targeting three major Iranian nuclear facilities in Fordow, Natanz, and Isfahan. However, it is reported that Iran notified the U.S. government of its attack plans in advance, minimizing damage. The U.S. Department of Defense also stated that, so far, there have been no reported American casualties resulting from Iran's attack.

The New York Times (NYT), citing multiple senior Iranian officials, reported that "Iran provided information just before the attack to minimize casualties," and that "a symbolic level of retaliation against the U.S. was necessary, but the attack had to be executed in a way that left an exit open for both sides."

This is interpreted as a signal that Iran, while taking symbolic retaliatory action against the U.S., does not want a full-scale confrontation or further escalation of tensions.

Jacob Funk Kirkegaard, Senior Managing Director at 22V Research, said, "While there is a possibility that Iran could attack other U.S. military bases in the region in the coming days, this would in effect reinforce Iran's stance of seeking to de-escalate tensions." He added, "Today's Iranian attack will help lower the global geopolitical risk premium that affects oil and gas trading."

Experts also believe that the likelihood of Iran completely blocking the Strait of Hormuz is low. The Strait of Hormuz handles 20% of the world's daily oil supply, and a complete blockade would be expected to cause a sharp spike in international oil prices. Bloomberg Economics (BE), JP Morgan, and Oxford Economics have projected that, if the strait were actually blocked, global oil supply disruptions could drive prices up to $130 per barrel.

Adam Crisafulli, founder of Vital Knowledge, said, "Iran is considering a blockade of the Strait of Hormuz, but investors are not panicking about a disaster in the oil market." He added, "While there is no doubt that geopolitical risks in the Middle East are elevated, the extreme imbalance of the conflict, Iran's relative isolation, and the ample supply of international oil will all serve to limit the impact of the conflict."

Mohit Kumar, Chief European Strategist at Jefferies International, said, "We do not expect the Strait of Hormuz to be closed, but there is a possibility of disruption." He continued, "Uncertainty may persist for several weeks, but our base scenario is that there will not be a sharp escalation in tensions."

U.S. President Donald Trump also sent a message to the market to lower oil prices on this day. Through his own social media platform, Truth Social, Trump wrote, "Everyone, lower oil prices," and added, "You are playing into the enemy's hands. You shouldn't do that." He continued, "To the U.S. Department of Energy: Drill, baby, drill. Right now." "Drill, baby, drill" was Trump's campaign slogan calling for expanded drilling for fossil fuels such as oil and gas. A surge in oil prices could lead to higher inflation, which would be a significant burden for President Trump, so he appears to be trying to prevent oil price hikes.

The risk-on sentiment led to a weaker U.S. dollar. The dollar index, which measures the value of the dollar against the currencies of six major countries, fell 0.34% from the previous trading day to 97.95.

U.S. Treasury yields are falling as comments from within the Federal Reserve continue to suggest a possible rate cut in July. The yield on the 2-year U.S. Treasury note, which is sensitive to monetary policy, fell 5 basis points (1bp=0.01 percentage point) from the previous day to 3.85%, while the yield on the 10-year U.S. Treasury note, the global bond benchmark, dropped 3 basis points to 4.33%.