International benchmark Brent rose on Monday on track for the third profit in a row, moving near three-week highs on concerns about supply disruptions due to growing geopolitical tensions in the Middle East.

Prices are also boosted by hopes of improving demand on fuel in China, the world’s largest oil importer, after the end of the New Lunar Year holiday. 

Brent Prices Today

Brent prices rose 0.5% to $83.47 a barrel, with a session-low at $82.58, after closing up 0.6% on Friday, scaling a three-week high at $83.63.  

Brent rallied 1.6% last week, the second weekly profit in a row as Middle East tensions grew. 

Middle East Tensions 

Geopolitical tensions in the Middle East continue to grow, as Israel continues to launch strikes against Hamas militants in Rafah, while western nations, led by the US, are calling for a ceasefire. 

A UK-registered cargo ship reported a new attack from Yemen’s coasts on Sunday, with the crew leaving the ship after an explosion. 

The Iran-backed Houthi group said it won’t stop escalating conditions in the Red Sea until the Israel war with the Gaza strip is over.

Chinese Demand 

Many analysts expect fuel demand to rebound in China as economic activities resume in full following the New Lunar Year holiday. 

Chinese authorities recently took fresh stimulus measures to support struggling growth, which is expected to reflect on fuel demand. 

In a strong start to the year, the US S&P 500 index managed to pierce the psychological level of 5,000, scaling a record high at 5,048 on February 12.

This stunning start led major banks and financial institutions to expect even more gains and record highs for the index throughout 2024. 

Goldman Sachs 

Goldman Sachs’ strategic analysts raised their S&P 500 price target for the second time this year, after the index pierced 5,000 points for the first time ever.

The analysts team said the upward revision comes as major Wall Street banks beat profits expectations. 

The investment bank now expects the index to scale 5,200 points by the end of the year. 

The new target is nearly 4% higher from the Friday February 16 close. It’s worth noting that Goldman Sachs in November 2023 expected S&P 500 to reach only 4,700 by the end of 2024. 

The new estimate is highly optimistic and bullish towards the US stock market.  

Huge Gains 

The S&P 500 rallied 4.9% so far this year as markets expect the Federal Reserve to start easing policies, and amid growing optimism for the burgeoning AI field. 

Strong Profits 

Goldman Sachs’ analysts said the profits growth for major corporations is the main driver for maintaining upward momentum this year and reaching the 5,200 target. 

The S&P 500 companies expected to show profits growth of 8.8% in 2024 compared to last year.

Bank of America's Forecasts 

Bank of America’s analysts said in a recent memo they’re willing to upgrade the price target for the S&P 500 as investors remain too cautious compared to fundamentals. 

Gold prices rose in European trade on Monday for the third straight session, scaling a week high on strong haven demand as Middle East tensions grow.

Prices are also buoyed by a recent drop in the dollar against a basket of major rivals as traders await more clues on the future of Fed interest rates.

Prices Today

Gold prices rose 0.5% to $2,023 an ounce, hitting a week high, with a session-low at $2,011, after rising 0.45% on Friday, the second profit in a row, moving off two-month lows at $1,984. 

The yellow metal lost 0.6% last week, the second weekly loss in a row as the odds of early US rate cuts this year wane.

Geopolitical Tensions 

A UK-registered cargo ship reported a new attack from Yemen’s coasts on Sunday, with the crew leaving the ship after an explosion. 

Geopolitical tensions have grown in the Middle East since the latest Israel-Hamas war broke out, with the Houthis launching rockets on ships going through the Red Sea passage almost on a daily basis. 

The Iran-backed Houthi group said it won’t stop escalating conditions in the Red Sea until the Israel war with the Gaza strip is over. 

The Dollar

The dollar index fell 0.1% on Monday, extending losses for the fourth straight session against a basket of major rivals. 

The dollar is also falling on profit-taking ahead of fresh clues this year on the future of Fed interest rates.

US Rates 

The markets are pricing in a 10.5% chance of a 0.25% Fed rate cut in March, with only a 36% chance of such a cut in May.

Traders now expect 75 basis points of total Fed cuts in 2024, down from 150 basis points in previous forecasts. 

Fed Minutes 

Markets are now waiting for the release of the Federal Reserve’s minutes for the meeting held in January to gather more clues on the likely path ahead for policies. 

Atlanta Fed President Raphael Bostic said that while he needs more data to convince him of the slowing inflation, he’s open to cutting interest rates at some stage in the next few months. 

 The SPDR

Gold holdings at the SPDR Gold Trust rose 0.58 tonnes yesterday to a total of 837.89 tonnes, away from an August 2019 low at 837.31 tonnes. 

Euro rose in European trade against a basket of major rivals, extending gains for the fourth straight session against the dollar and hitting a one-week high amid a positive outlook. 

Traders are buying up the EUR/USD pair around the low barrier of $1.07, while expecting more positive data this week from the eurozone.

EUR/USD

EUR/USD rose 0.15% to 1.0788, with a session-low at 1.0771, after rising 0.1% on Friday, the third profit in a row, moving off three-month lows at 1.0695. 

The pair lost 0.1% last week, the fifth weekly loss in a row due to concerns about a widening US-European interest rate gap.

Bullish Outlook 

Goldman Sachs’ analysts believe the EUR/USD pair will find support around the low barrier of 1.0700, following US retail sales data last week which will hinder a decline below 1.0700. 

The analysts expect the support to be carried on this week, with little volatility in the market. 

The UBS bank said that initial PMI data could show potential recovery in the eurozone, boosting the euro’s standing against major rivals.