Today’s action was much more volatile than would be expected. At first, things were fairly restrained, as traders balanced out positions ahead of the July 4th holiday. However, the action became much more volatile after two significant developments hit the newswires.
First was the news that Saudi Arabia had a meeting on Tuesday and agreed to utilize its considerable reserve capacity if the supply/demand balance became upset. The markets interpreted this to mean that the Saudis would increase production if sanctions were placed on Iran to curtail its production.
This would not be surprising, since the kingdom has done this before under comparable circumstances. This of course would be welcome by the Trump administration. The other big news was that China is seeking an injunction against US based chip manufacturer Micron. To many in the market, this seems to be a retaliatory move by China against the United States in response to US trade sanctions. Other companies in the space also declined in value as a result. Here’s what to expect.