Oil Surges 8% Amid Middle East Tensions, NFP Today

Oil prices are set for their largest weekly rise in over a year, driven by heightened Middle East tensions following a missile attack on Israel, raising concerns about further geopolitical conflict. Brent crude has gained around 8%. Meanwhile, European Central Bank policymakers and the Bank of England's chief economist are expected to deliver key speeches, while US markets brace for September's nonfarm payrolls report.

Equities

The FTSE 100 edged down 0.1% on Thursday, weighed down by a drop in mining stocks, while energy companies gained for the fifth consecutive session. Industrial miners and precious metal miners declined, with shares in those sectors down 1.2% and 0.3%, respectively.

Concerns about the conflict in the Middle East, a stronger US dollar, and uncertainty about Chinese demand all contributed to falling industrial metal prices. On the positive side, Tesco shares rose 2.5% after the supermarket group raised its annual profit forecast and reported a 10% increase in first-half core profit. Insurer Phoenix Group saw the largest decline on the FTSE 100, falling 5.7%.

In the US, major indices closed lower ahead of Friday’s crucial payrolls report. The Dow Jones Industrial Average dropped 0.44%, the S&P 500 fell 0.17%, and the Nasdaq was nearly flat, losing 0.04%.

Investors were cautious amid rising tensions in the Middle East, though energy shares rose alongside a surge in oil prices. The S&P 500 energy index rose 1.6%, bolstered by fears that an expanding conflict could threaten global oil supplies.

Constellation Brands' shares fell 4.7% after the beer maker maintained its sales and profit forecasts for fiscal 2025, disappointing investors. Meanwhile, the US service sector reported accelerated activity in September, reaching its highest level in 18 months, supporting the view that the US economy remained strong in the third quarter. However, strikes at key US ports could disrupt supply chains, potentially adding inflationary pressure in the coming months.

Overall, declining issues outnumbered advancing ones on both the NYSE and Nasdaq, and the Cboe Volatility Index, Wall Street's fear gauge, rose to its highest level since early September. US markets are now looking ahead to the September nonfarm payrolls report, which could be critical for assessing the Federal Reserve's next steps on interest rates.

Forex & Commodities

The US dollar hovered near a six-week high, bolstered by safe-haven demand as investors awaited the September US non-farm payrolls report.

Traders are closely monitoring US economic data, with the September non-farm payrolls report expected to reveal 140,000 job additions. Markets are also considering potential interest rate cuts from the Federal Reserve, with the CME FedWatch tool indicating a 65% chance of a 25-basis-point cut in November

The dollar index was up nearly 1.5% for the week, marking its strongest performance since April. In contrast, the yen regained 0.5% to 146.18 per dollar but remained close to its lowest point in over six weeks. Sterling traded at $1.3127, near a three-week low, after sliding 1% following dovish comments from the Bank of England's Governor, Andrew Bailey.

Gold prices edged up 0.3% to $2,662.72 per ounce, supported by geopolitical tensions in the Middle East, with safe-haven demand keeping the metal close to its all-time highs. Oil prices remained steady, with Brent crude at $77.55 per barrel and US West Texas Intermediate at $73.65, as markets weighed the potential impact of Middle East unrest on crude supplies. Both oil benchmarks were set for weekly gains of about 8%, as concerns about supply disruptions offset the well-supplied global market outlook.