Bonds, Stocks Retreat as Mideast Tensions Lift Oil: Markets Wrap

(Bloomberg) — Oil prices rose while bonds and stocks dropped after a flare-up in Middle East tensions reignited concerns over energy supplies, clouding the outlook for inflation and interest rates.

Brent jumped more than 3% to trade above $76 a barrel after the US launched fresh airstrikes in Iran and revoked a waiver that allowed it to sell oil globally, following attacks on ships in the Strait of Hormuz. Ten-year yields advanced in Australia and Japan, and also in New Zealand, where the central bank raised interest rates as expected. Treasuries steadied after sliding in late US trading.

In stocks, South Korea’s Kospi Index plunged more than 6% to approach a technical bear market, as investors rotated out of crowded chip shares and sought value in tech laggards such as Alibaba Group Holding Ltd. The Chinese firm’s stock surged more than 10% in Hong Kong.

Broader equity-market reaction to the latest escalation in geopolitical tensions was relatively contained. MSCI Inc.’s gauge for Asia fell 0.4%, while S&P 500 futures and contracts for the Nasdaq 100 slipped 0.2%. European stock futures fell 0.3%.

“At the margin, the spike in oil prices and the removal of the Iranian oil waiver strengthens the case for central banks to deliver precautionary rate hikes due to the ongoing risk of second round inflation taking hold,” said Sean Keane, chief strategist for Asia Pacific at JB Drax Honore.

US forces completed a round of offensive strikes against Iran, hitting over 80 targets, according to a post on X by the Central Command. Deputy Foreign Minister Kazem Gharibabadi warned Tehran would respond. Axios reported drones had been launched at Bahrain, and Kuwait said it was responding to missile attacks.

The renewed hostilities risk undermining the interim US-Iran peace deal reached last month while oil’s rebound threatens a new wave of disruption for global energy markets. A handful of vessels appeared to transit through the Strait of Hormuz in the early hours of Wednesday, even after a spate of strikes on tankers left shipowners struggling to assess the risk of operating in the vital waterway.

“Traders aren’t pricing a full re-escalation — and for now, that call looks defensible,” said Dilin Wu, a strategist at Pepperstone Group. “As long as the MOU framework holds and vessel transit volumes keep recovering rather than reversing sharply, the market reaction should stay contained to higher volatility rather than a trend reversal.”

Elsewhere, the Bloomberg Dollar Spot Index was steady after rising 0.2% on Tuesday. Gold traded in a narrow range, staying above $4,100 an ounce, as investors sought clues on the Federal Reserve’s outlook for interest rates. Bitcoin fell about 1.5%.

Equities in Indonesia dropped after S&P Dow Jones Indices signaled the country could eventually lose its emerging-market status if concerns over its equities market persist, dealing a setback to efforts to reassure global investors.

“After AI and tech sentiment had dominated market moves over the last couple of weeks, investors are now forced to move back to focusing on geopolitical tensions,” said Nick Twidale, chief market analyst at AT Global Markets. “And this should dominate market sentiment, especially if we see a further escalation in the coming sessions.”

Corporate Highlights:

SK Hynix Inc.’s $28 billion US listing is multiple times oversubscribed ahead of pricing on Thursday, according to people familiar with the matter. Shanghai Iluvatar CoreX Semiconductor Co. is considering a share sale to raise at least $800 million in Hong Kong after soaring since its initial public offering in January, according to people familiar with the matter. When Amazon.com Inc. sold its biggest ever bond earlier this year, it was inundated with investor orders amid hype about the AI boom. This time around, there’s less fanfare. Peak demand for its latest $25 billion offering reached $62 billion, according to people with knowledge of the matter. That’s about half the orders it attracted for its prior $37 billion deal in March. Meta Platforms Inc. debuted a new image-generation AI model, its first such release since the company spent billions to rebuild its AI lab under Chief AI Officer Alexandr Wang a year ago. Microsoft Corp., looking to reduce artificial-intelligence costs, is starting to replace OpenAI and Anthropic with its own models in software products like Excel and Outlook. Axis Bank Ltd., the top arranger of Indian debt markets, has lost three senior executives, adding to a big reshuffle taking place at private-sector lenders. China’s DeepSeek is developing its own chip to help power AI systems, Reuters reported, citing unnamed sources. Indonesia’s sovereign wealth fund Danantara has finalized the merger of four local firms to create the nation’s largest asset manager as it seeks to compete more effectively with financial institutions across the region. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 6:50 a.m. London time Nasdaq 100 futures fell 0.3% Futures on the Dow Jones Industrial Average fell 0.1% The MSCI Asia Pacific Index fell 0.4% The MSCI Emerging Markets Index fell 0.1% Japan’s Topix fell 1% Australia’s S&P/ASX 200 fell 0.5% Hong Kong’s Hang Seng rose 2.9% The Shanghai Composite fell 0.3% Euro Stoxx 50 futures fell 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1419 The Japanese yen fell 0.1% to 162.27 per dollar The offshore yuan was little changed at 6.7999 per dollar The British pound was little changed at $1.3356 Cryptocurrencies

Bitcoin fell 1.7% to $62,558.26 Ether fell 1.8% to $1,750.88 Bonds

The yield on 10-year Treasuries was little changed at 4.55% Germany’s 10-year yield advanced five basis points to 2.99% Britain’s 10-year yield advanced five basis points to 4.85% Japan’s 10-year yield advanced two basis points to 2.865% Australia’s 10-year yield advanced six basis points to 4.88% Commodities

Spot gold rose 0.5% to $4,126.06 an ounce West Texas Intermediate crude rose 3.3% to $72.74 a barrel This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Ruth Carson, Stephen Kirkland and Chris Bourke.

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