Oil Gains on Iran, Bonds Drop Before US Jobs Data: Markets Wrap

(Bloomberg) — Oil rose as prospects for a lasting agreement to reopen the Strait of Hormuz remained elusive. Bonds fell on inflation concerns as traders awaited the US jobs report for clues on the path of interest rates.

Global benchmark Brent rose 1.1% to $83.40 a barrel amid tensions in the Middle East and a lack of clarity on a deal to reopen the crucial waterway. Even so, oil is down about 5% for the week, having declined earlier on expectations for an agreement between the US and Iran.

Treasury futures edged lower as higher energy prices revived concerns that the Federal Reserve may need to keep interest rates elevated. The Treasury 10-year yield held at 4.68% after climbing seven basis points during the US session. Government bonds of similar tenor in Japan, Australia and New Zealand all fell.

Asian stocks slipped 0.1%, led by a 1% drop in South Korea.

The lack of a deal in the Middle East risks keeping energy prices higher, further weighing on a market already volatile on the artificial intelligence trade. Attention now turns to Friday’s US employment report for fresh clues on the Fed’s policy path. A stronger-than-expected non-farm payrolls reading would reinforce the case for higher-for-longer interest rates.

“There’s quite a bit of uncertainty around the US labor market and the subsequent Fed’s path forward,” said David Chao, global market strategist at Invesco. “Investors could be trimming risk exposure and taking some profit ahead of the NFP.”

Elsewhere, the dollar strengthened against nearly all of its Group-of-10 peers as expectations of higher interest rates pushed Treasury yields higher. A Bloomberg gauge of the currency’s strength steadied after posting its biggest gain in two weeks during the New York session.

Meanwhile, the yen is heading into the end of the week having surrendered nearly half of its intervention-driven gains.

Iran will seek to restrict US and Israeli ships from the Strait of Hormuz and require compensation from countries it considers hostile before allowing passage, according to local media reports on a proposed Iran-Oman agreement to manage the strategic waterway.

The reports come as officials in both Washington and Tehran have signaled that an accord may be close. President Donald Trump, who recently stepped back from threats to resume military strikes on Iran, said things are “moving along good” when asked for an update.

“Wall Street is reversing again from sharp recent gains, as a lack of clarity over the Strait of Hormuz has investors questioning whether the strong rally at the start of the week was justified by perceived improvements in geopolitical negotiations,” said José Torres, senior economist at Interactive Brokers.

US economic data released Thursday highlighted the resilience of the US labor market, leaving inflation as the key variable for the Fed’s September meeting. Initial jobless claims remained below 200,000 for a third consecutive week, while a separate report showed labor productivity accelerated by more than expected in the second quarter as companies worked to offset higher costs.

Traders now turn their attention to Friday’s payrolls report. Economists surveyed by Bloomberg expect employers added 80,000 jobs in July, following a weaker-than-expected gain of 57,000 in June. The report is expected to provide the clearest signal yet on whether the labor market is cooling enough to support expectations for Fed easing later this year.

“Stronger than expected data could see participants add to their near-term US Fed rate rise expectations and give the USD a boost,” Peter Dragicevich, currency strategist at Corpay Inc., wrote in a note.

Corporate Highlights:

Alphabet Inc. is set to raise $25 billion from a bond sale after generous yield payouts helped secure one of the year’s largest order books for AI-related debt. Japanese beverage maker Kirin Holdings Co. is acquiring Toronto-based Jamieson Wellness Inc. in a deal that values the Canadian vitamins and supplements maker at about C$2 billion ($1.4 billion). DeepSeek has resumed its second funding round, seeking close to $8 billion, with Monolith Management in talks to contribute, according to people familiar with the matter. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 11:57 a.m. Tokyo time Japan’s Topix rose 0.1% Australia’s S&P/ASX 200 was little changed Hong Kong’s Hang Seng was little changed The Shanghai Composite rose 0.4% Euro Stoxx 50 futures fell 0.2% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1522 The Japanese yen was little changed at 158.35 per dollar The offshore yuan was little changed at 6.7465 per dollar Cryptocurrencies

Bitcoin was little changed at $64,370.3 Ether fell 0.2% to $1,902.48 Bonds

The yield on 10-year Treasuries was little changed at 4.68% Japan’s 10-year yield advanced 1.5 basis points to 2.780% Australia’s 10-year yield advanced eight basis points to 5.01% Commodities

West Texas Intermediate crude rose 0.9% to $78.02 a barrel Spot gold rose 0.3% to $4,253.80 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu and Ruth Carson.

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