(March 16): Equity markets stabilised and crude oil gave up part of its early surge as US President Donald Trump raised pressure on nations to help reopen the Strait of Hormuz and said the US was talking to Iran.
Contracts for the S&P 500 Index rose 0.6% — set to end four days of losses for the underlying gauge — as Trump commented on the talks, although Iran said it had not asked for negotiations or a ceasefire. The MSCI All Country World Index — the broadest measure of global equities — was little changed, following three days of declines. Asian shares gained 0.2% while European equities were primed to advance.
Also helping the mood was a decline in the dollar, with Bloomberg’s gauge of the greenback falling 0.2%. The currency, which emerged as the haven of choice during the Middle East conflict, weakened against almost all its major peers.
Brent traded around US$104 a barrel after earlier climbing as high as US$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 US$100 a barrel.
Comments from Iranian Foreign Minister Abbas Araghchi that the Strait of Hormuz was only shut to ships from “enemies” also 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.
See also: Drake-backed Dave’s Hot Chicken mulling sale of its European franchise — Bloomberg
The US strike on Kharg Island 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, boosting 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.
See also: M&G profit tops estimates as money manager’s flows turn positive
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.
“A lot of the geopolitical premium was already priced last week, so traders seem to be waiting for clearer signs of actual supply loss before pushing prices materially higher,” said Haris Khurshid, chief investment officer at Karobaar Capital LP in Chicago. After the attack on Kharg, it “looks like the market is pricing disruption rather than a full supply shock", he said.
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.
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 fluctuated to trade around US$5,000 an ounce while silver extended its slide into a fourth day.
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.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
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.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.6% as of 6.50am London time.
- Nasdaq 100 futures rose 0.6%.
- The MSCI Asia Pacific Index rose 0.2%.
- Hong Kong’s Hang Seng rose 1.5%.
- The Shanghai Composite fell 0.4%.
- Euro Stoxx 50 futures rose 0.5%.
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%.
- The euro was little changed at US$1.1424.
- The Japanese yen rose 0.2% to 159.36 per dollar.
- The offshore yuan was little changed at 6.9037 per dollar.
- The British pound was little changed at US$1.3242.
Cryptocurrencies
- Bitcoin rose 2.9% to US$73,795.45.
- Ether rose 6.3% to US$2,263.32.
Bonds
- The yield on 10-year Treasuries declined two basis points to 4.26%.
- Japan’s 10-year yield advanced three basis points to 2.270%.
- Australia’s 10-year yield advanced five basis points to 5.00%.
Commodities
- Spot gold fell 0.2% to US$5,007.58 per ounce.
- West Texas Intermediate crude rose 0.6% to US$99.32 a barrel.
Uploaded by Arion Yeow
