CNBC Daily Open: Uncertainty around Israel-Iran conflict put investors on edge

The conflict between Israel and Iran is intensifying, with both countries not backing down from strikes and their leaders continuing to issue heated rhetoric. The prospect of the United States potentially joining the fray — which Russia warned would cause “a terrible spiral of escalation” — is putting the world on a knife’s edge.

That unease is reflected in the markets. While U.S. exchanges were closed Thursday for a holiday, futures retreated in the evening local time and oil prices jumped during the U.S. trading session. Across the Atlantic, travel and leisure stocks suffered the most as the Middle East conflict cast a shadow over international aviation.

At the Paris Air Show, however, aircraft manufacturers are still booking billions in orders. Airbus had secured more than $20 billion in deals as of Thursday, according to Reuters calculations. That said, those encouraging numbers may not reflect immediate optimism about the global economy or geopolitics — aircrafts take years to deliver, and both Airbus and Boeing have a backlog of more than 8,000 and 5,000 aircrafts respectively.

Until investors get a clearer sense of whether the U.S. will launch strikes on Iran, markets aren’t likely to find solid ground.

— Yeo Boon Ping

U.S. futures slip and oil jumps
U.S. futures slipped Thursday evening stateside. Regular trading in the U.S. was closed for the Juneteenth holiday. Meanwhile, oil prices for both U.S. crude oil and international benchmark Brent rose roughly 3% during the U.S. trading session after Israeli Prime Minister Benjamin Netanyahu ordered the military to intensify attacks on Iran. Europe’s regional Stoxx 600 lost 0.83%, with travel and leisure stocks falling the most.

Meta tried to buy OpenAI co-founder’s startup
Earlier this year, Meta tried to acquire Safe Superintelligence, the artificial intelligence startup launched by OpenAI co-founder Ilya Sutskever, according to sources familiar with the matter. Sutskever turned down Meta and its attempt to hire him, the sources said. But Daniel Gross, the startup’s CEO, and former GitHub CEO Nat Friedman will join Meta as part of Mark Zuckerberg’s deal with NFDG, a venture capital firm both men run.

Inflation in Japan at its highest in two years
Japan’s core inflation rate climbed to 3.7% in May, the highest since January 2023. The figure, which excludes fresh food costs, was higher than the 3.6% expected by economists polled by Reuters, and April’s reading of 3.5%. The Bank of Japan bank held rates at 0.5% after its monetary policy meeting earlier this week. Separately, Japan’s GDP shrank 0.2% quarter on quarter in the three months ended March.

Airbus stole the show in Paris
Airbus dominated the order books at the Paris Air Show. The European aircraft manufacturer had racked up nearly $21 billion of orders as of Thursday morning, per a Reuters calculation. That included 132 firm orders on Monday, from customers including Saudi leasing firm AviLease, Japan’s ANA and Poland’s LOT, versus 41 for Boeing and 15 for Brazil’s Embraer, according to a tally by aviation advisory IBA.

Bank of England holds interest rates
The Bank of England kept its key interest rate on hold at 4.25% during its Thursday meeting, with economists expecting the central bank to wait until August before it cuts again. Six out of nine of the BOE’s monetary policy committee opted to hold rates with three opting for a 25-basis-points cut. “Monetary policy is not on a pre-set path,” the BOE said in a likely signal to markets and investors to moderate rate cut expectations.

[PRO] Berkshire stocks drop without Buffett
Warren Buffett once predicted that Berkshire Hathaway stock would rise when he eventually steps down. So far, the opposite has happened. Since May 3, when the “Oracle of Omaha” announced his plans to hand over the reins, Berkshire stock has lost more than 10%, underperforming the S&P 500 by about 15 percentage points. Some think it could fall even more.