Oil prices surged, US bond yields spiked yesterday, and global equity markets gave back gains after remarks from US President Donald Trump dashed hopes of a swift resolution to the Middle East war.
Brent crude surged more than 7 per cent to around $110 a barrel after Trump said in a prime-time address on Wednesday that the US would hit Iran “extremely hard” in the coming weeks and “bring them back to the Stone Ages where they belong”.
On Wall Street, stocks opened lower on the last trading day of the week, with markets closed for the Good Friday holiday.
European shares also sank and Asian markets closed lower.
Government bond yields jumped on expectations that an inflation spike would force central banks to raise interest rates, or at least keep them on hold.
The dollar index climbed 0.39pc.
“Over the past 48 hours, Tehran and Washington have exchanged a cacophony of statements, some suggesting rising odds of de-escalation. At the same time, kinetic action has continued unabated,” BCA Research’s Felix-Antoine Vezina-Poirier said.
“Our GeoMacro strategists offer simple guidance for weighing volatile headlines: Stick to the facts. First, shipping through Hormuz has picked up over the past few days. Second, Iran is deliberately shifting away from GCC targets towards Israeli ones.”
MSCI’s gauge of stocks across the globe fell 0.43pc to 992.44.
On Wall Street, the Dow Jones Industrial Average fell 0.12pc to 46,511.17, the S&P 500 eased 0.02pc to 6,574.05 and the Nasdaq Composite lost 0.10pc to 21,818.35.
In a closely watched address on Wednesday, Trump said US attacks on Iran would be intensified over the next two to three weeks.
That came just a day after he told Reuters the US would be “out of Iran pretty quickly”.
The pan-European STOXX 600 index fell 0.2pc, while Europe’s broad FTSEurofirst 300 index fell 5.30 points, or 0.22pc.
Asian equities bore the brunt of the subsequent reaction , with Japan’s Nikkei closing down 2.4pc and South Korea’s Kospi index sliding 4.7pc.
“The only thing that really matters is whether the Strait of Hormuz will open soon,” said Prashant Newnaha, senior rates strategist at TD Securities, referring to the narrow chokepoint through which a fifth of global oil and liquefied natural gas is shipped.
“Trump’s speech doesn’t imply this is likely to happen as quickly as the markets were expecting.”
Trump said on Wednesday the US did not need the key oil gateway and that it would open naturally once the conflict was over.
Spot gold fell 1.48pc and spot silver fell 3.17pc.
There were growing signs of urgency in oil-importing emerging markets.
India’s central bank moved to ban trading of so-called non-deliverable forwards in an effort to halt the rupee’s run of record lows.
The move sent the currency up 2pc, although analysts questioned how long the rebound would last.
Brent futures rose to $106.43 per barrel, up 5.21pc, as US West Texas Intermediate soared 8.43pc to $108.56.
“The fact that we can expect 2-3 more weeks of action, boots on the ground were not ruled out (during Trump’s TV address) and that threats to hit infrastructure were reiterated, will put the market back on the defensive,” Pictet Asset Management’s Jon Withaar said.
The yield on benchmark US 10-year notes fell 2.8 basis points to 4.293pc.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.1 basis points to 3.792pc.
Euro zone benchmark Bund yields snapped a three-day decline and traders raised bets for interest-rate hikes.
German borrowing costs were still on track for their first weekly decline since the start of the war.
The 10-year government bond yield fell 0.7 basis points to 2.989pc.
Meanwhile, the Bahrain All Share Index closed at 1,889.63 points yesterday, marking a decrease of 12.65 points below the previous closing.
This decrease was due to the drop in the communications services sector, the financial sector, the industrial sector and the material sector.
Bahrain Islamic Index has closed at 904.78 points, marking an increase of 4.80 points above the previous closing.
Results indicated that 84 equity transactions took place with a volume of 915,416 worth BD355,863.
Investors traded mainly in the financial sector, representing 39.66pc of the total value of securities traded.
Major Gulf equities ended lower yesterday. Dubai’s main share index dropped 0.6pc, dragged down by a 2.5pc slide in toll operator Salik.
In Abu Dhabi, the index lost 0.7pc, hit by a 4.2pc decline in First Abu Dhabi Bank.
Gulf stock markets remain volatile as investor sentiment shifts with changing geopolitical signals, said George Pavel, general manager at Naga.com Middle East.
The Qatari index fell 0.4pc, with Qatar Gas Transport declining 1.9pc.
Threats to maritime traffic have increased as the conflict has intensified.
Saudi Arabia’s benchmark index gave up early gains to finish 0.1pc lower, with ACWA Power Co losing 1.6pc.
However, oil major Saudi Aramco added 0.2pc. Continued oil exports and elevated prices could offer some support, though existing constraints may limit the upside, Pavel said.
Outside the Gulf, Egypt’s blue-chip index retreated 0.7pc.
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