Stock market plummets following Trump's rejection of swift Israel-Iran truce, with RFK Jr. attacking pharmaceutical industry.
Stock Dip as Trump Insists on Iran's Nuclear Disarmament
The stock market took a hit today as the ongoing tension between Israel and Iran shows no signs of resolution. On July 17, the Dow Jones slipped 130 points, or 0.31%, with healthcare firms leading the declines. Meanwhile, the S&P 500 dropped 0.44% and the tech-heavy Nasdaq declined by 0.50%.
This downturn came following US President Donald Trump's call for the evacuation of Tehran, Iran's capital, which rattled investors, leaving them fearing a prolonged conflict. Instead of pushing for a ceasefire, Trump has maintained his stance on Iran's nuclear disarmament, an issue the regime is unlikely to accept.
As a result, oil prices surged by 3%, possibly posing a threat to the region's oil production and trade. Israel has already attacked major Iranian oil facilities, and there are fears that Iran might close the Strait of Hormuz, a vital global oil artery.
Crypto Market Boost Amid Rising Oil Prices?
Some economists suggest that a prolonged conflict could prompt the Federal Reserve to lower interest rates sooner than expected. Historically, sudden spikes in oil prices are seen as temporary and not factored into Fed decisions. However, in the current environment, a sustained rise in energy costs could pose a greater threat to jobs and economic growth.
With ongoing geopolitical tensions driving oil prices higher, the Fed is likely to remain cautious, keeping interest rates steady rather than lowering them in the near term. This cautious stance directly affects the crypto market, as lower interest rates typically encourage investment in riskier assets, like crypto. Delayed Fed easing could, in turn, deter the crypto market's recovery.
Ads Ban Threat for Pharma Companies
The Trump administration is considering new restrictions on pharmaceutical advertising, led by U.S. Health Secretary Robert F. Kennedy Jr. These changes could disrupt the approximately $10 billion annual spending by pharmaceutical companies on advertising. RFK Jr.'s plans include more disclosures in drug advertisements, potentially making commercials prohibitively expensive to produce and air.
Meanwhile, major food producer Kraft Heinz aims to remove artificial food coloring from significant brands like Kool-Aid and Jell-O by 2027, following RFK Jr.'s efforts against ultra-processed foods.
Impact of Oil Prices on Crypto and Fed's Monetary Policy
Prolonged oil price increases may lead to inflation risks, prompting the Federal Reserve to maintain higher interest rates for longer periods. This reduced potential for Fed interest rate cuts could indirectly suppress the crypto market's gains by influencing Fed policy decisions toward tighter monetary conditions. In summary, as oil prices surge due to geopolitical tensions, the Fed becomes more cautious, keeping rates steady, which restrains crypto price rallies and digital asset recoveries.
References:
- The Balance – How Crude Oil Influences Stock Market Investing
- Nasdaq – The Fed and Oil: What's the Connection?
- Brookings – The Fed's Expected Rate Cuts Have Stalled Amid Ongoing Tension in the Middle East
- Investopedia - Commodities Prices, Oil Prices and Inflation
- CNBC - The Fed May Keep Rates Lower for Longer as Geopolitical Risk Sparks Commodity Markets Instability
- The surge in oil prices due to geopolitical tensions might potentially influence the crypto market, as historically, lower interest rates encourage investment in riskier assets like cryptocurrencies.
- The prolonged conflict between Israel and Iran could indirectly affect the crypto market, as a cautious stance by the Federal Reserve, in response to rising oil prices and inflation risks, may keep interest rates steady, restraining crypto price rallies and digital asset recoveries.
- Economists suggest that ongoing geopolitical tensions driving oil prices higher could prompt the Fed to lower interest rates sooner than expected, which typically encourages investment in riskier assets such as cryptocurrencies and Initial Coin Offerings (ICOs).
- Some pharmaceutical companies might face advertising limitations due to new restrictions under consideration by the Trump administration, which could have an indirect impact on the crypto market by reducing overall investor confidence and spending power in the general-news and business sectors, potentially impacting the demand for digital assets like crypto and DeFi (decentralized exchange) tokens.
