Oil Climbs, Treasuries Decline on Iran Strikes: Markets Wrap

(Bloomberg) — Oil rose and Treasuries declined after the US launched another round of strikes against Iran, while conflicting claims over the status of the Strait of Hormuz heightened uncertainty.

Brent crude climbed more than 3% to $78.50 a barrel on concerns over potential supply disruptions. Treasuries dropped across the curve with the yield on the benchmark 10-year rising two basis points to 4.58%. Government bonds in Australia and Japan also declined, while the dollar strengthened against all of its Group-of-10 peers.

Futures for the Nasdaq 100 Index retreated 0.1%. Tech remained in focus, with SK Hynix Inc. shares falling 2.5% in Seoul after the company surged 13% in its US trading debut on Friday. MSCI’s gauge for Asia Pacific shares erased earlier losses and climbed 0.2%.

Precious metals slid, with gold losing 0.8% to about $4,085 an ounce, while silver dropped 1%, as higher oil prices and inflation concerns boost the prospect for higher interest rates.

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.

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 Fed 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 0.2% as of 9:07 a.m. Tokyo time Japan’s Topix rose 0.7% Australia’s S&P/ASX 200 rose 0.1% Euro Stoxx 50 futures fell 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.1% to $1.1403 The Japanese yen fell 0.2% to 161.94 per dollar The offshore yuan was little changed at 6.7839 per dollar Cryptocurrencies

Bitcoin fell 0.3% to $63,948.68 Ether was little changed at $1,818.97 Bonds

The yield on 10-year Treasuries advanced two basis points to 4.58% 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 3.4% to $73.85 a barrel Spot gold fell 0.8% to $4,087.52 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess and Momoka Yokoyama.

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