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Oil prices jumped and stock futures fell on Monday as rising tensions in the Middle East kept shipping in and out of the Gulf to a minimum, though traders held out hope for a resolution and Asia’s equity markets breezed toward record highs.
Brent crude futures rose about 6% to $95.36 a barrel. S&P 500 futures fell around 0.6% and European futures fell 1.2%. But equity benchmarks in Seoul, Taipei and Tokyo shrugged off risks to advance, with Taiwan’s shares touching a record high and the other two not far behind.
Iran has re-imposed its de facto closure of the Strait of Hormuz, though Kpler data showed that more than 20 vessels carrying oil products, metals, gas and fertiliser passed through on Saturday, the busiest day for the chokepoint since March 1.
The ceasefire in the Iran war, due to run until Tuesday, was in doubt after the US seized an Iranian cargo ship and Tehran’s top military command vowed to retaliate.
“The headlines look bad; it looks like there’s disagreement … which has led to a little bit of re-escalation,” said Damien Boey, portfolio strategist at Wilson Asset Management in Sydney.
“But I think, ultimately, both sides want to be able to do a deal – that’s part of the reason why the market’s optimistic and not selling off too much.”
Hong Kong’s Hang Seng rose 0.7%, Japan’s Nikkei climbed 0.8% and South Korea’s KOSPI rose 1%. One of the strongest notes of caution in markets on Monday came from Australia’s largest business lender, National Australia Bank, which flagged a $500 million impairment charge as it expects the war to drive up bad debts. NAB shares fell 3.6%.
Outside the Middle East, British Prime Minister Keir Starmer is slated to address Parliament on Monday, facing calls for his resignation over his handling of the appointment of Peter Mandelson as US ambassador even though he had failed a vetting process.
Iran rejected new peace talks with the US, its state news agency reported on Sunday, hours after US President Donald Trump said he was sending envoys for talks in Pakistan and would launch new strikes on Iran unless it accepts his terms.
“Our base case (AKA guess) is still resolution to the war. Trump is still focused on November midterm elections,” said Paul Chew, head of research at Singapore’s Phillip Securities in a note to clients.
Bonds, which rallied on Friday, retreated and the yield on benchmark 10-year Treasuries rose 2.2 basis points to 4.266%, while German and French bond futures fell.
The dollar – which was sold for the best part of the past two weeks – steadied, buying 158.8 yen and trading at $1.1760 per euro.
Wall Street indexes touched record highs on Friday, supported by expectations of robust first-quarter earnings, the bulk of which come this week.
British inflation data, US retail sales and European purchasing managers’ index figures are also due through the week, though much of markets’ focus will be on Gulf shipping.
“The critical barometer of geopolitical risk has been distilled into one data point: The number of ships transiting the Strait of Hormuz,” said Bob Savage, head of markets macro strategy at BNY.
“Peace talks matter, but the immediate focus is on oil and other supply shortages driving inflation.”
European stocks fell Monday as oil prices surged over fears hostilities could resume in the weeks-long Middle East war, after Iran closed the Strait of Hormuz following its brief reopening.
Investors were on edge approaching the end of the US-Iran ceasefire, with Iran insisting it has no plan to attend a new round of negotiations with the United States.
“The market mood is very different at the start of the week compared to Friday,” said Kathleen Brooks, research director at trading group XTB.
Crude had plunged Friday after the Islamic republic said it would again allow ships to pass through the Strait of Hormuz, through which a fifth of global oil and liquefied natural gas usually passes.
But world oil prices bounced on Monday as Iran closed the waterway and said the US blockade and seizure of an Iranian cargo ship breached the two-week ceasefire.
In Europe, Paris and Frankfurt stock markets shed more than one per cent in midday deals, while London was down 0.8 per cent.
That came after gains for Tokyo, Hong Kong and Shanghai.
“Asian shares rebounded as they were in catch-up mode, having missed the rally seen in the US and Europe on Friday,” said AJ Bell investment director Russ Mould.
“European indices presented a truer picture of the market mood, with investor wariness and weariness amid the continuing tensions in the Middle East,” he added.
The blockade of Iranian ports has been a significant sticking point in negotiations between the two countries, who have both traded accusations of ceasefire violations.
The Fars and Tasnim news agencies had earlier cited anonymous sources as saying “the overall atmosphere cannot be assessed as very positive”, adding that lifting the US blockade was a precondition for negotiations.
Agencies
