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 more than 3% to $78.50 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 bond climbing three basis points to 4.23%, the highest since February 2025. Australian and Japanese sovereign bonds also fell, while the dollar strengthened against all of its Group-of-10 peers.
Stocks were mixed with US equity-index futures slipping 0.2%, while MSCI’s gauge for Asia Pacific shares fluctuated between small gains and losses. Tech remained in focus, with SK Hynix Inc. shares falling 5% 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 periods of heightened geopolitical risk, investors tend to favor sectors with strong earnings, which means semiconductor shares are likely to remain relatively resilient.”
In other corners of the market, precious metals declined, with gold losing 1.2% to about $4,070 an ounce, while silver dropped 1.7%, as higher oil prices and inflation concerns boost the prospect for higher interest rates. Bitcoin erased earlier losses to trade around $64,175.
Earlier, the US military launched strikes Sunday aimed at further weakening Iran’s ability to strike 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.
What Bloomberg Strategists Say…
US bonds are also vulnerable to more losses should oil prices stay firm as short positioning in Treasury futures is well below the extremes seen in August and September last year and within the range seen since early February. That suggests the oil-bonds-dollar nexus will continue to play out in the near term.
— Mark Cranfield, MLIV. To read the full analysis, click here.
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.
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 could 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.
Elsewhere this week, Asian markets will look to China’s second quarter growth data for fresh signs of a slowing economy from sluggish domestic demand and Bank of Korea’s policy decision.
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 9:44 a.m. Tokyo time Hang Seng futures rose 0.3% Nikkei 225 futures (OSE) fell 0.5% Japan’s Topix rose 0.3% Australia’s S&P/ASX 200 fell 0.2% Euro Stoxx 50 futures fell 0.1% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.2% to $1.1397 The Japanese yen fell 0.2% to 162.00 per dollar The offshore yuan was little changed at 6.7858 per dollar Cryptocurrencies
Bitcoin fell 0.7% to $63,745.66 Ether fell 0.4% to $1,813.41 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.59% Japan’s 10-year yield advanced five basis points to 2.750% Australia’s 10-year yield advanced three basis points to 4.87% Commodities
West Texas Intermediate crude rose 4.2% to $74.40 a barrel Spot gold fell 1.1% to $4,073.26 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Momoka Yokoyama.
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