Major Moves

Crude oil prices jumped today as tensions between the United States and Iran have worsened. It started when Iran's Islamic Revolutionary Guard Corps (IRGC) shot down an unmanned U.S. drone along the Strait of Hormuz with a surface-to-air missile. Iranian officials claim the drone had violated Iranian airspace, but U.S. officials deny this claim.

Tensions further worsened when President Trump responded by tweeting, "Iran made a very big mistake!" Traders are now starting to wonder if the conflict between the United States and Iran could lead to crude oil supply disruptions.

The price of crude oil, like all commodities, is driven by the forces of both supply and demand. For the past two months, traders have been focused primarily on concerns about crude oil demand. They have been concerned that a slowdown in the global economy – triggered by the trade war between the United States and China, "Brexit," or the Trump administration levying tariffs on Mexico or some other country – could reduce demand for crude oil.

Now, traders seem to be focusing less on demand concerns as they shift their gaze to potential supply concerns – like crude oil tankers being attacked or an escalation of military conflict – that could restrict the amount of crude oil coming out of the Middle East to China, the United States, and the rest of the world.

When traders fear that supply is going to be reduced, they push the price of crude oil higher, which is exactly what we've seen today. The price of crude oil had its best day of 2019 today as it jumped 5.69% to close at $57.22 per barrel.

The price increase in crude sent stocks like Noble Energy, Inc. (NBL), Halliburton Company (HAL), and Schlumberger Limited (SLB) soaring higher, as higher oil prices typically lead to fatter margins and increased production and expansion for U.S. oil companies.

Chart showing the performance of light crude oil futures

S&P 500

The S&P 500 continued its bullish streak this week and closed at a new all-time high of 2,954.18, which was just shy of the index's intra-day high of 2,958.06. While the S&P 500's 0.95% gain may not have been the largest surge higher we've seen this year, it certainly is one of the most important.

When the index completed its head and shoulders pattern in late May, many were wondering if trade disputes and tariffs were going to derail the global economy and the U.S. stock market. Seeing the S&P 500 break above the previous all-time high of 2,954.13, which was established on May 1, should give traders confidence that Wall Street has not exhausted its bullish reserves just yet.

Slack Technologies, Inc. (WORK) took advantage of the bullish mood in the markets today as it jumped higher on its trading debut. The company had set the stock's initial public offering (IPO) price at $26, but the stock opened at $38.50 and went on to close the day at $38.62.

Looking at the rest of the stock market, I'll be interested to see how much profit taking we see tomorrow as we head into the weekend. Regardless, it has been a fantastic week on Wall Street.

Read more:

Chart showing the performance of the S&P 500 Index

Risk Indicators – Gold

Gold enjoyed its largest single-day gain of 2019 today as traders scrambled to add the safe-haven asset to their portfolios. Traders have been nervous all year about the stability of the financial markets. They have been addressing these concerns by moving away from riskier assets – like small-cap stocks – and into more conservative assets.

Up until now, the primary beneficiary of this move has been Treasuries. However, in the wake of the Federal Open Market Committee (FOMC) hinting that it is willing to cut interest rates, traders are starting to wonder if Treasuries are going to continue seeing their yields drop. For instance, the 10-year Treasury yield (TNX) dropped below 2% today.

The lower Treasury yields go, the more attractive gold – which is a non-yielding asset – becomes. Gold jumped 3.57% today to close at $1,396.90. The bullish move made short work of the resistance level – originally established in mid-February – that the precious metal has been hitting for the past two weeks.

I wouldn't be surprised to see this trend continue into next week as the world waits to see what is going to happen between President Trump and President Xi Jinping during their one-on-one meeting during the G-20 summit next week in Japan.

Read more:

Chart showing the performance of gold futures

Bottom Line – Reading the Mixed Signal Tea Leaves

I know it seems strange to see the S&P 500 closing at a new all-time high while the price of gold is taking off like a rocket, but it is the perfect illustration of the current sentiment on Wall Street.

Everybody wants to ride the bullish equity run higher, but they want to make sure they have plenty of protection in their portfolios if anything should go wrong.

Read more:

Enjoy this article? Get more by signing up for the Chart Advisor newsletter.