Oil Climbs, Treasuries Drop After US Strikes Iran: Markets Wrap

(Bloomberg) — Oil rose and Treasuries fell after the US launched another round of strikes against Iran, reviving concern that higher energy prices will keep inflation elevated and interest rates higher for longer.

Brent crude climbed 4.4% to $79.35 a barrel as conflicting claims over the status of the Strait of Hormuz fueled speculation about potential supply disruptions. Treasuries dropped across the curve with the yield on the rate-sensitive two-year note climbing three basis points to 4.24%, the highest since February 2025. Australian and Japanese sovereign bonds also fell, while the dollar strengthened against all of its Group-of-10 peers.

MSCI’s gauge for Asia Pacific shares declined 0.5% and futures contracts for the Nasdaq 100 Index retreated 0.8%. Tech remained in focus, with SK Hynix Inc. shares sliding 9.3% in Seoul after its US-listed American depositary receipts surged 13% in their trading debut on Friday.

Renewed tensions in the Middle East come at a pivotal time for markets as investors brace for the start of earnings season, with Goldman Sachs Group Inc. and JPMorgan Chase & Co. due to report Tuesday. The results will mark the first major test of whether corporate earnings can justify a rally fueled by optimism over artificial intelligence.

“A resumption of attacks between the US and Iran could become a negative catalyst for markets,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab.

In other corners of the market, precious metals declined, with gold losing 1% to about $4,080 an ounce, while silver dropped 1.6%, as higher oil prices and inflation concerns boost the prospect for higher interest rates.

The US military launched strikes on Iran Sunday aimed at further weakening the country’s ability to attack civilian vessels transiting the Strait of Hormuz, the US Central Command said. The latest action followed Iranian drone and missile attacks on US allies including Kuwait, Jordan and Qatar.

Confusion over the status of the Strait of Hormuz added to the uncertainty, with Iran saying it had closed the waterway, while the US military and maritime authorities said shipping continued through its southern route.

“The re-escalation in the Gulf is a reminder that there remains high uncertainty over the outcome and timing of any resolution in the Strait as well as what the new normal looks like,” Damien McColough, head of fixed income research at Westpac Banking Corp., wrote in a note to clients.

Investors will also closely gauge this week’s US inflation data, after oil’s biggest weekly gain since mid-May revived concerns that higher energy costs may further complicate the disinflation story. Traders have ramped up bets on further tightening, with swaps pricing almost 40 basis points of Federal Reserve interest-rate hikes by December, up from about 15 basis points in early June.

Fed Chair Kevin Warsh will also make his first congressional appearance since taking the helm after pledging to scale back forward guidance on the rate outlook. Earlier this month in Sintra, Portugal, Warsh said price risks have come down in recent weeks and repeated his determination to bring inflation back to the US central bank’s 2% target.

Warsh is less likely to be a major driver for Treasuries “unless he breaks with the tone he’s established across the first meeting and the comments in Sintra,” said Kenneth Crompton, head of rates strategy at National Australia Bank Ltd. in Sydney. “Markets are slightly more sensitive to the Iran headlines at the moment.”

Corporate News:

Nippon Paint Holdings Co. has made multiple offers for Akzo Nobel NV’s decorative paints business in the past month, according to people with knowledge of the matter. Regis Resources Ltd. has announced it will not submit a counterproposal to match the bid made by Genesis Minerals Ltd. for Vault Minerals Ltd. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.3% as of 10:47 a.m. Tokyo time Nikkei 225 futures (OSE) fell 1.8% Japan’s Topix fell 0.7% Australia’s S&P/ASX 200 fell 0.3% Hong Kong’s Hang Seng rose 1% The Shanghai Composite fell 0.6% Euro Stoxx 50 futures fell 0.6% Currencies

The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.2% to $1.1397 The Japanese yen fell 0.2% to 161.97 per dollar The offshore yuan was little changed at 6.7813 per dollar Cryptocurrencies

Bitcoin fell 0.9% to $63,572.75 Ether fell 0.4% to $1,813.16 Bonds

The yield on 10-year Treasuries advanced three basis points to 4.59% Japan’s 10-year yield advanced six basis points to 2.760% Australia’s 10-year yield advanced three basis points to 4.86% Commodities

West Texas Intermediate crude rose 4.4% to $74.54 a barrel Spot gold fell 0.9% to $4,084.37 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess and Momoka Yokoyama.

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