Oil prices drop as stocks climb amid eased war fears

Market insights

David Morrison, a senior market analyst at Trade Nation, noted, "Investors seem less fearful than they were going into the weekend regarding the possibility of the war spreading." He highlighted that most Israeli airstrikes avoided significant parts of Iran's energy infrastructure, and Iran's retaliatory actions have resulted in minimal damage.

Wall Street performance

Wall Street's main stock indices finished higher, with the S&P 500 gaining nearly one percent throughout the day. European markets also closed with gains, tracking positive momentum from Asia, where Tokyo rose by 1.3 percent, supported by a weaker yen.

Oil market reactions

Following Israel's surprise strikes on Iranian military and nuclear sites—resulting in the deaths of top commanders and scientists—oil prices initially soared by as much as 13 percent. However, concerns over the conflict's escalation appeared to ease, leading to a decline in oil prices on Monday.

Chris Beauchamp, chief market analyst at IG, stated, "As long as the Straits of Hormuz remain stable, it is hard to envision a scenario where Friday’s gains can be sustained."

OPEC+ influence

Analysts pointed to the recent decision by the OPEC+ group, led by Saudi Arabia and Russia, to increase output in July as another factor influencing oil prices. Kathleen Brooks from XTB remarked, "A major escalation in the conflict may be needed for another sharp upswing in oil and gold prices."

Upcoming monetary policy decisions

Investors are preparing for monetary policy announcements this week from the US Federal Reserve, Bank of England, and Bank of Japan. All are expected to maintain current rates, but traders will be closely watching for hints on future interest-rate outlooks amid pressure from President Trump to lower borrowing costs.

Corporate news highlights

In corporate developments, shares of Nippon Steel rose over three percent after Trump signed an executive order approving its $14.9 billion merger with US Steel, concluding a long-standing saga. US Steel shares increased by 5.1 percent.

Additionally, shares in Kering, the owner of Gucci, climbed nearly 12 percent following reports that the outgoing CEO of Renault would take over as chief executive of the struggling luxury group. Conversely, Renault shares plummeted 8.7 percent after announcing that Luca de Meo would step down in July.