Crude spent Tuesday finishing the job it started Monday. West Texas Intermediate fell 3.3% to $79.87 a barrel and Brent dropped 3.9% to $84.91, as Iran held talks with Saudi Arabia and Oman over the Strait of Hormuz and the pause in fighting with the US held. That came on top of Monday’s rout, when September Brent fell 8.7% to close at $88.36 and September WTI dropped 7.5% to settle at $82.61.
Two sessions, roughly eleven percent off Brent, and the war premium was gone.
Then, at 5:45 p.m. Eastern, Islamic Revolutionary Guard Corps forces launched multiple ballistic missiles at US forces in the Middle East. Central Command said every one of them was intercepted. Crude reversed instantly: WTI traded up 3.92% at $82.37 and Brent up 3.86% at $87.34 in evening hours, with CNBC quoting WTI as much as 4.4% higher at $82.73.
Stock futures rose into the missile headline
This is the part worth sitting with. A ballistic missile attack on American forces used to be a risk-off event by definition. Instead, Dow futures added 63 points, or 0.12%, to 53,007. S&P 500 futures gained 0.35% to 7,491.25. Nasdaq 100 futures rose 0.48% to 28,054.75.
The cash session had already been strange in its own right. The Dow climbed 537.24 points, or 1.03%, to 52,747.32 on strong earnings and cheaper crude, while the S&P 500 managed just 0.21% to 7,428.78 and the Nasdaq Composite slipped 0.22% to 24,876.91 as semiconductors sold off for a fourth straight day.
And the Fed lands in the middle of it
The FOMC statement arrives Wednesday at 2 p.m. ET, with the chair’s press conference at 2:30. The funds rate sits at 3.5%–3.75%, and economists polled by FactSet expect a fifth consecutive hold. There is no Summary of Economic Projections at this meeting, so no dot plot to argue about — just the statement, the presser, and whatever oil happens to be doing while the chair is speaking.
Our take: The oil market has stopped trading intentions and started trading interception rates. Monday and Tuesday, traders priced peace and took roughly $11 out of Brent. At 5:45 p.m. they got the precise opposite of peace — and gave back only about a third of it, because CENTCOM said nothing got through. That is the whole model now: not was there an attack, but did anything land. It works until it doesn’t. A defense that intercepts 100% of incoming is a defense with no margin for error priced into it, and the barrel that finally reprices this conflict will be the one that comes off the market for real — a damaged terminal, a closed lane, a tanker that doesn’t sail. Until then, every headline is a fade. Trade the fade if you must, but size it like the day the fade fails.
What to watch
- The 2 p.m. statement. Oil round-tripping eight dollars inside a rate-decision week is the noisiest possible inflation input. Watch whether the language on energy changes at all.
- Hormuz shipping and war-risk insurance rates, not headlines. Tanker premiums move slower than futures and lie less.
- Whether the Saudi and Omani channel survives the attack. The talks are why crude fell; a walkout is why it goes back.
- The semis. Four straight down days for chips while the Dow rips is a rotation, and rotations end abruptly.