Energy Leads, Financials Lag as Markets React to Middle East Strikes

Markets opened the week under heavy geopolitical pressure. Over the weekend, the United States and Israel carried out coordinated strikes on Iran under Operation Epic Fury. Iranian Supreme Leader Ali Khamenei and several senior officials were reportedly killed. Tehran responded with missile attacks targeting U.S. military bases in Bahrain, Qatar and the UAE, and launched attacks on oil tankers near the Strait of Hormuz.

Former President Donald Trump stated the military operation was “ahead of schedule” and signaled openness to negotiations. Investors, however, are focusing on supply risks.

Oil Leads the Shock

Brent crude surged 13% in Sunday trading, breaking above $82 per barrel. The move reflects growing concerns about oil transportation through the Strait of Hormuz — a critical chokepoint for global energy flows.

If disruptions persist, the impact could extend beyond energy markets. A sustained supply shock would likely reignite inflation pressures and complicate the Federal Reserve’s policy stance ahead of its March meeting.

Gold and silver are rallying as safe-haven demand intensifies. Equity futures are trading lower, and the balance of risks remains negative amid elevated volatility.

U.S. Index Setup

Previous session: The S&P 500 and Nasdaq both closed lower. The S&P settled below 6,900, extending its local consolidation structure. Nasdaq futures pulled back from the 50-day moving average and ended below 25,000.

Today: Futures for both indices remain under pressure. To prevent further downside and stabilise sentiment, key support levels stand at 6,750 for the S&P 500 and 24,500 for Nasdaq futures. Resistance is seen near 6,800 for the S&P and 25,000 for Nasdaq.

What Is Moving Markets Now?

• Escalation of military conflict between the U.S. and Iran
• Oil supply risks linked to tanker congestion in the Strait of Hormuz
• U.S. ISM Manufacturing PMI and final S&P Global Manufacturing PMI data
• Safe-haven flows into gold

The earnings season is nearing completion, with more than 96% of S&P 500 companies having reported fourth-quarter results. Aggregate earnings growth stands at 14.2%. Guidance improved. Margins didn’t expand meaningfully.

Sector Performance

Cyclical sectors showed mixed performance. Energy (XLE) and Materials (XLB) led gains, reflecting commodity strength. Financials (XLF) and Retail (XRT) lagged.

Growth segments were broadly weaker, with Solar (TAN) and IPO-related names under pressure. Communication Services (XLC) and Biotech (IBB) managed modest gains.

Defensive sectors outperformed, led by Healthcare (XLV), which continues to trade within a medium-term upward channel.

Intermarket Signals

Oil is accelerating within a medium-term ascending channel, gapping higher and holding above 72.

U.S. Treasury yields remain within a local corrective structure, staying below 4%.

The VIX volatility index has gapped higher toward 24, breaking above its medium-term descending trendline.

Gold continues its local uptrend, approaching 5,400 per ounce as safe-haven demand intensifies.

Once again, investors are recalibrating expectations — this time around geopolitical risk rather than monetary policy.

Technical analysis by: Lucas Grant, Senior Technical Analyst at Finmire.