(April 24): Oil rose for a fifth day as concerns grew that the US and Iran were making little progress toward resuming talks on de-escalation, keeping the Strait of Hormuz effectively closed.
Brent, the global crude benchmark, rose 0.8% to almost US$106 a barrel, taking this year’s gains to about 74%. The commodity is set for its biggest weekly gain since the first week of the war as the closure of the Strait disrupts the flow of oil from the Middle East to the rest of the world.
Treasury 10-year yields and Bloomberg’s gauge of the dollar both headed for their first weekly advance in a month as hopes for easing Middle East tensions faded, giving way to concerns about escalation. The picture in equities was mixed, with Asian shares fluctuating, while futures contracts for the Nasdaq 100 Index advanced 0.5% after a strong earnings forecast from Intel Corp.
While risk premiums have eased in recent weeks, investors remained cautious heading into the weekend as sentiment hinges on whether tensions with Iran escalate or give way to diplomacy. Traders will watch signals from Washington and Tehran, along with shipping flows, for clues on energy supply risks, with any Strait of Hormuz disruption likely to keep oil elevated and weigh on global economic growth.
“There’s a fair bit of uncertainty when it comes to diplomacy between the two sides,” said Fawad Razaqzada at Forex.com. “Less comforting is the ongoing lack of clarity around the Strait of Hormuz. With no clear plan to reopen it, uncertainty remains elevated.”
The prospect of Iran agreeing to more in-person peace talks with the US is being hindered by President Donald Trump’s threats and brash social media posts, according to several officials with knowledge of the diplomatic efforts to end their war.
See also: Stocks fall with bonds as Iran concerns boost oil
While Trump said Israel and Lebanon will extend their ceasefire by three weeks, tensions in the Middle East remained high. US forces boarded a supertanker carrying Iranian oil in the Indian Ocean as the navy stepped up its blockade of the Islamic Republic’s shipping. Tehran continues to keep Hormuz effectively closed, preventing the passage of hundreds of millions of barrels of oil and fuel as well as other commercial traffic.
“As long as flows through the Strait remain restricted, the market keeps tightening and oil inventories keep falling, oil prices will remain supported,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.
The MSCI Asia Pacific Index swung between gains and losses. Stocks in Japan and Taiwan rose, while those in China and Hong Kong declined.
See also: Stocks rise on big earnings day as war talks stall
While Wall Street gauges edged lower on Thursday, Nasdaq 100 futures rose 0.7% early Friday on optimism sparked by Intel. The chipmaker jumped 20% in after-hours trading after its sales forecast topped expectations.
Semiconductor stocks were outliers in the US session, climbing for a 17th consecutive day. In Asia, Taiwan Semiconductor Manufacturing Co climbed to a record after the country’s financial regulator eased limits on single-stock fund holdings.
While markets have whipsawed on geopolitical risks, corporate profits have remained strong. Nearly 80% of the US equity benchmark’s firms have beaten first-quarter earnings estimates so far, according to data compiled by Bloomberg.
As volatility increased with the onset of the Iran conflict, financial markets have proven relatively resilient, said Adam Hetts and Oliver Blackbourn at Janus Henderson.
“Investors coalesced around the critical assumption that hostilities and the associated disruptions to the global economy would be short lived,” they said. “Our sentiment and positioning indicators showed drawdowns within several market segments reaching capitulation territory and could therefore represent attractive entry points.”
Corporate highlights:
- Meta Platforms Inc and Microsoft Corp are planning cuts or announcing buyouts that could affect as many as 23,000 jobs, part of an effort to streamline operations and offset heavy spending on artificial intelligence.
- Warner Bros Discovery Inc shareholders voted overwhelmingly to approve a merger with Paramount Skydance Corp, despite widespread opposition to the deal in Hollywood.
- Spirit Aviation Holdings Inc is in “very advanced discussions” with the US government on terms of a material financing package, its lawyer Marshall Huebner said Thursday.
- Comcast Corp reported first-quarter financial results that exceeded analysts’ estimates with fewer losses among broadband customers, offsetting lacklustre growth at its Peacock streaming service.
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Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 11.52am Tokyo time
- Japan’s Topix fell 0.1%
- Australia’s S&P/ASX 200 fell 0.4%
- Hong Kong’s Hang Seng fell 0.6%
- The Shanghai Composite fell 0.6%
- Euro Stoxx 50 futures fell 1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1679
- The Japanese yen was little changed at 159.77 per dollar
- The offshore yuan was little changed at 6.8369 per dollar
Cryptocurrencies
- Bitcoin rose 0.5% to US$78,313.24
- Ether was little changed at US$2,323.92
Bonds
- The yield on 10-year Treasuries was little changed at 4.33%
- Japan’s 10-year yield advanced two basis points to 2.440%
- Australia’s 10-year yield was little changed at 5.01%
Commodities
- West Texas Intermediate crude rose 0.7% to US$96.54 a barrel
- Spot gold fell 0.4% to US$4,675.89 an ounce
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