MAJOR stock indexes eased yesterday as Brent oil futures rose above $105 a barrel, with Iran’s denial of any talks with the US dimming hopes of a quick resolution to the nearly one-month-long Middle East war.
Global debt markets also sold off, pushing yields higher, while safe-haven buying boosted the US dollar.
Prospects of a prolonged war in the Middle East fanned worries about energy supply disruptions. Oil and European natural gas rose, with Brent futures up $4.77 at $106.99 a barrel and US crude futures up at $93.64.
US President Donald Trump warned Iran yesterday to “get serious” about a deal to end nearly four weeks of fighting.
Iran’s Foreign Minister Abbas Araqchi had earlier said Tehran was reviewing the US proposal but that there were no talks on winding down the war. Iran yesterday launched multiple waves of missiles at Israel.
The war has rattled global markets and effectively shut the Strait of Hormuz, a conduit for a fifth of global oil and liquefied natural gas flows.
Stocks fell “as oil prices resumed their upward climb”, said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The Dow Jones Industrial Average fell 75.50 points, or 0.19 per cent, to 46,342.69, the S&P 500 fell 43.59 points, or 0.68pc, to 6,547.14 and the Nasdaq Composite fell 216.95 points, or 1.02pc, to 21,705.16.
MSCI’s gauge of stocks across the globe dropped 6.75 points, or 0.68pc, to 988.71. The pan-European STOXX 600 index fell 0.64pc.
Japan’s Nikkei ended down 0.3pc, while worries over rising energy costs hammered South Korea’s KOSPI, which slumped 3.2pc. Hong Kong’s Hang Seng fell 1.9pc and China’s blue chips dropped 1.3pc.
The Philippines held an unscheduled central bank meeting due to the turmoil, while Germany’s central bank head said an ECB rate hike next month was “an option”.
Fears of a 2022-style inflation shock have seen traders fully price out any chance of a Federal Reserve rate cut this year, further supporting the dollar.
Germany’s two-year bond yield, sensitive to European Central Bank rate expectations, rose after falling on Wednesday. Bond yields move inversely to prices.
Worries about persistent inflation also drove US Treasury yields higher. The benchmark US 10-year Treasury yield was last up 4.2 basis points at 4.37pc. The two-year note’s yield was last up 5.4 bps at 3.934pc.
Earlier, the yield on Japan’s two-year government bond hit its highest level in 30 years at 1.33pc, as traders cemented bets on another Bank of Japan rate hike as early as next month.
In currencies, the US dollar rose against most major currencies, reviving its safe-haven appeal.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.1pc to 99.75, with the euro down 0.13pc at $1.1544. Against the Japanese yen, the dollar strengthened 0.04pc to 159.53.
Gold retreated as the dollar rose. Spot gold was down 0.89pc at $4,465.06 an ounce.
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