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Investing.com - U.S. stocks could be at risk if recent attacks between Israel and Iran turn into a wider conflict, according to analysts at RBC Capital Markets.
Israel and Iran exchanged fresh strikes over the weekend that killed and wounded civilians, and threatened to send the Middle East spiralling into a fresh period of violence.
Tehran has told mediators Oman and Qatar that it will not engage in ceasefire talks helmed by the U.S. while Israel is carrying out its strikes, Reuters has reported, citing an official briefed on the matter.
Israel, meanwhile, has warned Iranians living near nuclear facilities to evacuate. The country targeted these locations and other ballistic missile programs in a wave of attacks first launched early on Friday. Surface-to-surface missile sites were attacked by Israel on Monday.
Oil prices advanced, extending a sharp climb at the end of the prior trading week, as markets assessed few signs of easing in the conflict. By 03:37 ET (07:37 GMT), Brent crude futures had climbed by 0.4% to $74.53 per barrel, while U.S. West Texas Intermediate crude futures rose 0.5% to $71.64 a barrel. Both of the contracts had soared by over $4 earlier in the session.
Meanwhile, U.S. stock futures pointed higher, possibly indicating some resilience in equities after a sharp decline logged on Friday.
But the RBC strategists led by Lori Calvasina said the developments in Israel and Iran have come at a "complicated time" for U.S. stocks.
"[O]ur drawdown/rebound, investor sentiment, and stock market seasonality analysis have all been making the case for the S&P 500 to climb a bit higher for a bit longer. But our valuation/earnings and GDP analysis have been suggesting that the stock market has gotten a little ahead of itself for 2025, keeping risks of a near-term pullback top of mind for us," the analysts said in a note to clients on Monday.
With this in mind, stocks on Wall Street could be impacted if the violence takes "some time to play out" and if it evolves into a "broader regional" conflict, they said.
"The broader the conflict becomes and the longer it lasts, the more problematic we think it will be for U.S. equity markets," the analysts argued.