Stocks wavered as crude oil pared an early 3% jump on Monday, easing some concerns after the US strike on Iran's main export hub. The dollar and gold dropped. Asian shares gave up early gains to fall 0.5%, while contracts for the S&P 500 Index rose 0.4%, signaling the Wall Street gauge's four-day decline may be set to end. The mixed moves came as President Donald Trump said that the US was talking with Iran, although the Islamic Republic said it hadn't asked for talks or a ceasefire.
Brent traded around $104 a barrel after earlier climbing as high as $106.50 following US strikes on military targets on Kharg Island, the terminal that handles almost all of Iran's oil exports. West Texas Intermediate traded below $100 a barrel.
Comments from Iranian Foreign Minister Abbas Araghchi that the Strait of Hormuz was only shut to ships from “enemies” helped soothe some nerves. Two tankers carrying liquefied petroleum gas to India sailed through the strait — a route that normally handles about a fifth of the world's oil supplies.
The US strike on Kharg had threatened to inject fresh volatility into energy markets already grappling with some of the biggest swings in oil in decades. Oil's surge since the war began has rippled across asset classes, pushing Treasury yields higher on inflation concerns, lifting the dollar and weighing on global equities.
“The market is trying to stabilise, but it is not one that has turned optimistic,” said Charu Chanana, chief investment strategist at Saxo Markets. “Equities may welcome any sign that Hormuz could be reopened, but with further strikes still being threatened and diplomacy still patchy, conviction is low and positioning is likely to stay very twitchy.”
Trump said late Friday that US forces struck military targets on Kharg Island and warned attacks may expand to energy infrastructure if Tehran interferes with transit through the Strait of Hormuz. Traffic through the waterway has nearly halted since the war began, and Iran's supreme leader said the strait should remain shut if it continues.
The US president also urged other countries to send warships to keep open the Strait of Hormuz but offered no specifics or commitments from the US side. He said he hoped China, France, Japan, South Korea and the UK would take part.
Trump's call for global assistance or “burden sharing” to keep open the strait is consistent with his agenda of the US pushing the world to share more of the costs of energy and sovereign security, according to JB Drax Honore.
“International assistance would certainly reduce the burden on American resources,” said Sean Keane, chief strategist for Asia Pacific.
In other corners of the market, US Treasuries gained, with benchmark 10-year yields dropping two basis points to 4.26% to head for their first decline in five sessions. A Bloomberg gauge of US government bonds turned negative for the year after losing 1.7% since the end of February as the surge in oil prices added to inflation jitters.
Gold fell for a fourth day to trade around $5,000 an ounce. The Bloomberg Dollar Spot Index dropped 0.2% after a three-day winning run.
Some other positives also emerged. The International Energy Agency indicated oil from an unprecedented stockpile release will be made available immediately in Asia as buyers seek to replace disrupted Middle East supply.
The agency's statement came after it received implementation plans for the record 400-million-barrel reserve release announced last week.
The Trump administration plans to announce as soon as this week that it has formed a coalition with a number of countries to escort ships through the strait, the Wall Street Journal reported on Sunday. Still under discussion, however, was whether such an operation would begin before or after the missile strikes end, the report said.
“Most in the market are still extremely cautious as we have an uncertain Trump government in terms of what they will do or say,” said Nick Twidale, chief market analyst at AT Global Markets in Sydney.
Key Events Next Week
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.4% as of 12:06 p.m. Tokyo time
- Japan's Topix fell 1.2%
- Australia's S&P/ASX 200 fell 0.5%
- Hong Kong's Hang Seng rose 0.4%
- The Shanghai Composite fell 1.1%
- Euro Stoxx 50 futures rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.1449
- The Japanese yen rose 0.1% to 159.57 per dollar
- The offshore yuan was little changed at 6.9042 per dollar
Cryptocurrencies
- Bitcoin rose 1.1% to $72,547.82
- Ether rose 2.4% to $2,181.29
Bonds
- The yield on 10-year Treasuries declined two basis points to 4.26%
- Japan's 10-year yield was unchanged at 2.240%
- Australia's 10-year yield advanced three basis points to 4.98%
Commodities
- West Texas Intermediate crude rose 0.3% to $99.04 a barrel
- Spot gold fell 0.3% to $5,003.31 an ounce
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