Oil Gains, Treasuries Fall as Trump Rebuffs Iran: Markets Wrap

(Bloomberg) — Oil rose and bonds fell after President Donald Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz, reigniting Middle East tensions that have roiled global debt markets.

Brent crude climbed 1.3% to about $105.70 a barrel as Iran stuck to a seven-day proposal for reopening the Strait of Hormuz. The rise in oil added to inflation concerns, pushing the 10-year Treasury yield four basis points higher to 5.20%. Government debt of similar tenor in Japan and Australia was also weaker.

MSCI’s gauge of Asian stocks opened slightly lower with South Korea’s benchmark slipping as markets returned from a holiday, while Japanese stocks edged higher. Futures for the S&P 500 Index fell 0.2%. Gold dropped 0.7% to about $4,250 an ounce, as oil’s advance stoked inflation concerns.

A Bloomberg gauge of the dollar rose against most major currencies. The pound weakened against the dollar as UK police investigated a potential terrorism incident after five men were arrested near an air base used in US strikes on Iran. Trump said the suspects were “looking to do big damage” to the facility.

Oil remains a key driver for markets as elevated energy costs add to inflation pressures and bolster expectations for further rate increases. Last week, the average yield on a gauge of global bonds climbed above 4% for the first time since 2007, raising concerns that higher borrowing costs may eventually weigh on the economy and on company earnings.

“Geopolitical developments over the weekend are likely to keep volatility elevated across global markets,” Nick Twidale, chief market analyst at AT Global Markets, wrote in a note to clients.

Iran stuck to its proposal to reopen the crucial Strait of Hormuz within seven days, saying it won’t soften its conditions. Trump said he expects negotiations to resume this week despite rejecting Tehran’s latest offer, Axios reported. He also said he’s thinking “very seriously” about a ban on diesel exports.

Several Federal Reserve officials have pointed to resilient economic growth and a strong labor market as reasons further tightening may be needed. Cleveland Fed President Beth Hammack said those factors, along with concerns about government debt, are helping drive long-term Treasury yields higher.

Traders are fully pricing at least one more 25 basis-point hike before year-end.

Treasury Secretary Scott Bessent struck a more dovish tone, saying policymakers should keep an “open mind” on rates as productivity gains from artificial intelligence and deregulation may help contain inflation.

Volatility may persist this week, with the Fed’s preferred inflation gauge and US jobs reports set to shape expectations for at least one more rate increase this year, following the central bank’s first hike since 2023 earlier this month.

Corporate Highlights:

SK Hynix Inc.’s Solidigm is considering a US initial public offering as soon as next year, according to people familiar with the matter. South Africa’s Gold Fields Ltd. has expressed interest in acquiring Northern Star Resources Ltd., according to people with knowledge of the matter, a potential blockbuster deal that would deepen the miner’s bet on Australia’s prolific deposits of the metal. The Chinese government has signaled it may allow companies such as Alibaba Group Holding Ltd. and ByteDance Ltd to purchase Nvidia Corp.’s new RTX Pro 5500 chips, The Information reported, citing people familiar with the matter. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 9:18 a.m. Tokyo time Hang Seng futures were little changed Japan’s Topix rose 0.5% Australia’s S&P/ASX 200 rose 0.1% Euro Stoxx 50 futures rose 0.4% Currencies

The Bloomberg Dollar Spot Index rose 0.1% The euro was little changed at $1.1381 The Japanese yen fell 0.3% to 157.70 per dollar The offshore yuan was little changed at 6.7252 per dollar Cryptocurrencies

Bitcoin was little changed at $84,491.26 Ether was little changed at $2,687.43 Bonds

The yield on 10-year Treasuries advanced four basis points to 5.20% Japan’s 10-year yield advanced 2.5 basis points to 3.095% Australia’s 10-year yield advanced four basis points to 5.41% Commodities

West Texas Intermediate crude rose 0.9% to $93.26 a barrel Spot gold fell 0.7% to $4,254.96 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess.

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