Stocks, Bonds Fall as Oil Stays Above $100 on Iran: Markets Wrap

(Bloomberg) — Stocks and bonds dropped as stalled US-Iran talks and the continued closure of the Strait of Hormuz drove oil prices higher, souring risk sentiment after a record rally on Wall Street.

MSCI’s Asia Pacific equity gauge fell 0.5% as higher oil prices damp the outlook for economic growth. Futures contracts for the S&P 500 Index and the tech-heavy Nasdaq 100 both dropped 0.5%, after the underlying gauges closed at a record high on Wednesday on robust corporate earnings and the extension of the US-Iran ceasefire. European shares were primed to open 0.7% lower.

Brent crude climbed 1% to about $103 a barrel, putting it on track for a fourth straight day of gains, due to a lack of progress in US-Iran talks. The benchmark has surged 70% this year, with most of the advance coming after the Middle East conflict started in late February. Bonds fell as higher oil prices stoked inflation concerns.

While President Donald Trump said a truce with Iran would remain in place indefinitely, investors remain wary of the lack of progress in talks to resolve the nearly two-month conflict. The longer the war drags on and the Strait of Hormuz stays shut, keeping oil prices elevated, the greater the risk of significant economic fallout for economies worldwide.

“Markets have taken a glass-half-full view during this conflict, hoping for a quick resolution and normalization of energy flows through the Strait,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia in Sydney. “I still think markets will soon come to realization the path to a long lasting agreement is still some way away and energy prices will likely increase further before easing.”

Tensions remain high as the US and Iran failed to meet for a fresh round of peace talks, with both sides blocking the waterway to gain leverage during an extended ceasefire. Tehran says it has no plans to take part in negotiations imminently.

The US maintained a naval blockade on ships going to and from Iran’s ports to pile pressure on the Islamic Republic, in a move Iranian Foreign Minister Abbas Araghchi called a violation of the ceasefire.

What Bloomberg Strategists Say…

“There is a high motivation for taking chips off the table as the MSCI World index is up more than 8% this month and the calendar is full of major central bank meetings next week. Traders will also be wary of sudden talk about a super-cycle of demand in AI. Typically it is just when there is broad recognition of a theme, it is time to take some profits.”

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Treasuries headed for a fourth day of losses, with the 10-year yield rising two basis points to 4.32%, while the dollar gained against most of its major peers.

In other corners of the market, gold slipped 0.6% to about $4,710 an ounce, while silver declined 1.9% to about $76.25 an ounce. Bitcoin was a touch weaker at about $78,000.

One positive news was strong earnings from US companies. Tesla Inc. reported earnings that beat estimates. Texas Instruments Inc. gave a strong forecast for the current period. Boeing Co. jumped on solid first-quarter deliveries.

In Asia, SK Hynix Inc. reported a five-fold increase in profit.

Robust corporate profits, the revival of the artificial-intelligence trade and an otherwise resilient economy have buoyed stocks despite lingering geopolitical risks. Nearly 80% of the S&P 500 companies reporting first-quarter results have beaten analyst earnings estimates so far, according to data compiled by Bloomberg.

The Philadelphia Stock Exchange Semiconductor Index gained for a record 16th day as investors bet on continued strength driven by artificial intelligence-related demand. A gauge of Asian technology shares made a modest 0.1% gain, erasing earlier losses.

“The recent rally in Asia tech despite ongoing supply chain disruption suggests investors are increasingly looking through near-term geopolitical risks,” said Gary Tan, a fund manager at Allspring Global Investments. “But a sustained re-rating versus the US will likely hinge on capex signals from hyperscalers in next week’s earnings reports.”

Corporate Highlights:

European earnings: Nestlé SA sales rose more than expected; Roche Holding AG first-quarter sales dropped; Heineken beer volumes fell more than expected; Nokia Oyj earnings beat; Safran SA expects to hit the top end of its guidance range for this year; Renault SA’s revenue rose and Sanofi profit rose on blockbuster drug. International Business Machines Corp. posted quarterly sales in its software unit that were in line with estimates. Lululemon Athletica Inc. named Heidi O’Neill its new chief executive officer. Taiwan Semiconductor Manufacturing Co. will hold off on deploying ASML Holding NV’s most cutting-edge lithography machines for chip production through 2029 to save money. European car sales jumped the most in nearly two years in March as strong growth for fully electric and hybrid models powers a recovery in the region’s contested auto market. Hyundai Motor Co. first-quarter earnings missed estimates as South Korea’s largest automaker grappled with US tariffs and cooling demand in key markets. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.5% as of 6:50 a.m. London time Nasdaq 100 futures fell 0.5% The MSCI Asia Pacific Index fell 0.5% The MSCI Emerging Markets Index fell 0.3% Japan’s Topix fell 0.8% Australia’s S&P/ASX 200 fell 0.7% Hong Kong’s Hang Seng fell 0.9% The Shanghai Composite fell 0.3% Euro Stoxx 50 futures fell 0.8% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1704 The Japanese yen was little changed at 159.54 per dollar The offshore yuan was little changed at 6.8328 per dollar The British pound was little changed at $1.3492 Cryptocurrencies

Bitcoin fell 0.5% to $78,022.51 Ether fell 1.8% to $2,349.51 Bonds

The yield on 10-year Treasuries advanced two basis points to 4.32% Japan’s 10-year yield advanced 2.5 basis points to 2.420% Australia’s 10-year yield advanced five basis points to 5.01% Commodities

Spot gold fell 0.6% to $4,713.42 an ounce West Texas Intermediate crude rose 1.4% to $94.26 a barrel This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess and Winnie Hsu.

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