Nasdaq dips as growth concerns and inflation rise amid US-Iran tensions

The Nasdaq opened lower yesterday following a coordinated attack by the United States and Israel against targets in Iran, including key officials and military facilities. The operation reportedly resulted in the deaths of Iran’s Supreme Leader Khamenei and numerous other regime officials.

Iran responded with attacks targeting Israel and US bases in several Gulf States, including Jordan, Kuwait, Bahrain, Qatar, Iraq, Saudi Arabia, and the United Arab Emirates.

Market Response and De-escalation Efforts

Iran’s actions were intended to increase pressure for an end to the conflict. Reports indicated that the United Arab Emirates and Qatar were lobbying allies to encourage the United States to de-escalate the situation. These efforts, along with other de-escalation attempts, contributed to the Nasdaq erasing earlier losses and closing the day higher.

However, late yesterday, an advisor to the commander of Iran’s Islamic Revolutionary Guard Corps (IRGC) stated that the Strait of Hormuz had been effectively closed and that any ships attempting to pass through would be targeted. Traffic through the Strait has subsequently decreased significantly. The ongoing conflict poses a potential threat to the global economy.

Market analysts suggest the stock market is at risk of a significant selloff if conditions worsen, potentially leading to negative growth expectations and limiting the Federal Reserve’s ability to respond to inflationary pressures stemming from higher energy prices. The current market bias remains neutral to bearish, and a clear de-escalation of the conflict is needed before investors are likely to increase bullish positions.

Nasdaq Technical Analysis – Daily Timeframe

The Nasdaq has been trading within a wide range since October of last year, as visible on the daily chart. Market analysts suggest that such extended consolidations often precede substantial trending movements once a price breakout occurs. Until then, market participants are expected to continue trading within the established range.

Nasdaq Technical Analysis – 4 Hour Timeframe

The 4-hour chart reveals a tighter range between the 24,173 support level and the 25,466 resistance level. Market participants are anticipated to continue trading within this range, selling at resistance and buying at support, until a breakout occurs.

Nasdaq Technical Analysis – 1 Hour Timeframe

On the 1-hour chart, the price is currently near the lower bound of the average daily range for the day. In such situations, the price typically consolidates or experiences a pullback before the next significant move. A potential pullback towards the downward trendline could lead to increased selling pressure, while buyers may seek a break above the trendline to increase bullish bets towards the 25,466 resistance level.

Upcoming Catalysts

Economic data releases are scheduled throughout the week. Tomorrow features the US ADP employment data and the US ISM Services PMI. Thursday will see the release of the latest US Jobless Claims figures, followed by the US Non-Farm Payroll (NFP) report on Friday. However, market analysts suggest that these data points may have limited impact this week due to the ongoing US-Iran conflict.