Markets Wobble as Geopolitics Spike: Dow Drops, Oil Soars

 US Weekly Recap: Dow (1.32%), S&P (0.39%), Nasdaq (0.63%), Russell 2000 (1.49%)
Friday, June 13, 2025 (GMT)

Underperformers: Financials (2.61%), Industrials (1.60%), Consumer Spls. (1.14%), Communication Svcs. (0.82%), Materials (0.50%)

Overview:

US equities were lower this week, with some moderate weekly gains for the major indices evaporating in Friday’s risk-off session amid the growing Israel-Iran conflict. Big tech was mixed, with AAPL (3.7%) a laggard after an underwhelming WWDC but TSLA +10.2% continuing its rebound on signs of Trump-Musk reconciliation. Other underperformers included airlines, cruise lines, insurance, retail/apparel retail, credit cards, exchanges, staples retailers, and banks (particularly regionals). Outperformers included energy, ag chemicals, commodity chemicals, managed care, semis, auto suppliers, and homebuilders. Most-shorted names added to their recent strength.

Treasuries were stronger, with yields more than erasing the prior week’s increases. The market absorbed $119B in new Treasury issuance this week, with a $39B auction of 10s and a $22B sale of 30s both seeing strong demand. The dollar was down on the major crosses, with the DXY (1.0%) logging its third decline in the past four weeks and ending at its weakest point since early 2022 amid continued weakening of the American exceptionalism theme. Gold was up 3.2%. WTI crude rose 13.0% for the week, its largest weekly gain since October 2022, powered by a big Friday gain after Israel’s strikes on Iran.

What happened?:

Trade was once again a major thread in the week’s narrative, with US-China talks in London reaching an agreement after more than two days of negotiation. However, the agreed framework largely confirmed the Geneva consensus, with China opening up exports of rare-earth products while allowing up to a 55% tariff on China’s imports to the US and allowing Chinese students back in US universities. For its part, China put a six-month limit on its rare-earth export licenses. All in all, the agreement did little but reset the table and open the path for more negotiations to come. However, with the 90-day reciprocal clock counting down there were multiple headlines about the difficulty of negotiations (reports US and Indian negotiators were hardening their positions in talks thought to offer an early win). In extemporaneous remarks Trump also hinted at the potential to ratchet auto tariffs higher, though he also hinted the 9-Jul reciprocal deadline could be extended.

Geopolitics seized the spotlight Thursday night into Friday after Israel launched a massive series of strikes against Iran, aimed at crippling its nuclear program and killing senior military commanders. The US characterized this as a unilateral action, though media reports suggested the White House had given the green light, and Trump has since expressed some support and called Tehran back to the bargaining table to conclude a nuclear deal. There were indications Israeli strikes could continue for some time. Iran’s initial retaliation with drones seemed to cause little damage but by Friday afternoon the IDF was reporting “all of Israel” was coming under fire. The unclear and evolving situation sparked a risk-off day in the markets and the largest single-day gain for crude since 2022.

On the economic front, headline and core May CPI came in below consensus, with limited signs of tariff impact; May PPI was similarly cool (both played into the narrative the Fed may have a freer hand to cut rates). Initial jobless claims were a touch above consensus while continuing claims printed at their highest since November 2021, though previews had suggested some seasonal factors may be at play. NFIB small-business optimism rose, breaking a four-month streak of declines, though the report continued to note elevated uncertainty. Finally, preliminary UMich consumer sentiment came in notably stronger than consensus, while inflation expectations at the one- and five-year time horizons moved lower.

The bull-bear picture remains muddled given the lack of clarity about the Israel-Iran conflict. The market has a history of looking beyond geopolitics, but the scale of Israel’s attack makes comparisons to previous incidents challenging. Trade headlines this week were also a mixed bag, with some relief on the US-China rapprochement but also notes that bilateral deals could remain difficult to close. But on the flip side, there were positive takes on cooler inflation data, a settling of consumer anxieties, solid demand support for Treasuries, and continued AI optimism.

Corporate highlights:

Notable gainers this week included INSM +34.2% on better-than-expected trial data. OKLO +26.6% benefited from continued nuclear enthusiasm and prospects of Defense Department contracts. MODG +20.4% was helped by substantial insider purchases. ORCL +23.7% results were ahead with takeaways focused on strong FY26 guidance. Reports the government may use the Defense Production Act for rare earths helped MP +18.9%. CASY +14.0% beat on most key metrics with analysts highlighting strong fuel margins.

To the downside, BA (5.0%) was lower after a 787 Air India Dreamliner crashed; the plane operated with GE (7.4%) engines. CHWY (13.6%) revenue was better, though analysts flagged elevated expectations. SJM (13.7%) organic growth was unexpectedly negative while guidance disappointed. UNFI (23.6%) left guidance unchanged despite a quarterly beat amid assessment of unauthorized IT activity. GME (25.2%) upsized a private offering of convertible senior notes. OXM (28.1%) cut FY guidance to reflect current tariff projections.

Coming next week:

The FOMC will hold its June meeting on June 17-18 next week, though expectations are that rates will remain unchanged and Chair Powell will reiterate comments about policy being in a good place and the need to remain guided by incoming data. The economic calendar brings the NY Fed’s Empire manufacturing index (Monday); retail sales, industrial production, and NAHB homebuilder sentiment (Tuesday); housing starts and jobless claims (Wednesday); and Philly Fed manufacturing (Friday). Note the market will be closed Thursday for the Juneteenth holiday. The corporate earnings calendar is very light, with the major reporters including KR, LEN, DRI, JBL, and KMX. On the geopolitical front, President Trump will be attending the G7 leaders’ summit in Canada, which runs 15-18 June. Note representatives from the US and Iran had been scheduled to meet this weekend in Oman for a sixth round of nuclear talks, but these have now been suspended indefinitely.

S&P 500 Sector Performance:

Outperformers: Energy +5.73%, Healthcare +1.25%, Utilities +0.20%, Consumer Disc. +0.08%, Tech (0.08%), Real Estate (0.23%)

Underperformers: Financials (2.61%), Industrials (1.60%), Consumer Spls. (1.14%), Communication Svcs. (0.82%), Materials (0.50%)

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