US open: Stocks on the rise after oil price boosted by Iran withdrawal
Wall Street trading opened on a positive note on Wednesday, as energy shares were given a boost by Donald Trump's decision to withdraw from the Iran nuclear deal.
At 1530 BST, the Dow Jones Industrial Average and Nasdaq were up 0.13% and 0.18%, respectively, while the S&P 500 had gained 0.35%.
Oil & Gas stocks were in the ascendant, with the best-performing segments of the market being: Coal (4.53%), Oil Equipment (3.0%), Oil & Gas producers (2.97%) and Integrated Oils (2.62%).
Trump said on Tuesday evening that the US would exit the 2015 agreement and reimpose sanctions on Iran. He said in a statement that it was a "horrible, one-sided deal that should never, ever have been made" and that rather than protecting the US and its allies, it placed "very weak limits on the regime's nuclear activity".
European powers, meanwhile, reiterated their commitment to the 2015 agreement, while Iranian President Hassan Rouhani said that for now, he considers the deal to be intact.
Although Trump had been widely expected to announce the withdrawal, analysts said the threat that he would also penalise anyone who helps Iran is likely to have a lasting impact on markets.
Oil prices gained on the back of the announcement, with West Texas Intermediate and Brent crude up 2.5% to $70.86 a barrel and $76.76, respectively.
David Cheetham, chief market analyst at XTB, said: "The geopolitical repercussions of this decision will no doubt be widely felt, and due to as many as 1m barrels of crude supply per day being effectively taken off the market when these sanctions are enforced, it represents a large supply-side shock for crude and this has driven the price up to its highest level since 2014."
Meanwhile, FXTM research analyst Lukman Otunuga pointed out that China and Russia, with whom Trump has had "questionable" relations in recent weeks, are also part of the Iran nuclear agreement.
"What this all likely means to the financial markets is that anxiety could be heightened over a new round of geopolitical tensions. This will not have been helped by Iran immediately stating that it was preparing to restart uranium enrichment, which is key for making nuclear weapons."
On the corporate front, stock in TripAdvisor surged 23.1% after better-than-expected earnings late on Tuesday, but energy drinks company Monster Beverage lost 7.29% after its earnings undershot forecasts.
Electronic security ADT meanwhile was losing 2.96% after reporting a net loss of $157m and pizza chain Papa John's dropped 5.93% after it reported a drop in quarterly sales late on Tuesday.
New York-based manufacturer Coty picked up 1.96% after topping earnings expectations, as luxury revenues offset a miss from its consumer beauty business, and medical diagnostics firm Mylan collected 2.01% after it upped its guidance despite having turned in results that fell short of Wall Street expectations for first-quarter revenues.
Earnings are still due from 21st Century Fox and Roku after the close.
On the macroeconomic front, US wholesale prices rose by less-than-expected in April amid an unexpected drop in food prices.
According to the Bureau of Labour Statistics, the US producer price index for final demand edged higher by 0.1% month-on-month and 2.6% year-on-year.
Economists had forecast a dip in the year-on-year rate of price gains from the 3.0% observed in the month before to 2.8%.
Elsewhere, wholesale trade continued its 2018 growth streak in March but fell short of analysts' expectations.
The US Census Bureau's wholesale inventories gauge increased 0.3% month-on-month in March, totalling about $627bn, short of consensus forecasts of a 0.5% increase.