Stocks Pare Losses on Oil Reserve Release Report: Markets Wrap
(Bloomberg) — Equities trimmed declines after the Financial Times reported that Group-of-Seven countries will discuss a possible joint release of petroleum from reserves, helping cap the surge in energy costs.
Asia’s benchmark share index pared its drop to less than 4% after earlier falling as much as 5.6%. Equity-index futures for the US and Europe also narrowed losses.
Stocks were still well down on the day on concern the surge in oil over the past week will quicken inflation and sap global growth. Crude on Monday surged above $100 a barrel for the first time since 2022, with the US-Israeli war against Iran showing no sign of easing and both sides appearing set to prolong the conflict. The dollar strengthened and government bonds dropped.
Brent crude had jumped as much as 29% to $119.50 a barrel, adding to last week’s 28% surge, as the Iran conflict entered a second week. West Texas Intermediate rose as much as 31%. The commodity also pared some of its advance following the FT report.
The US and Iran appeared to be digging in for a potentially lengthy conflict. Iran named the son of the late Ayatollah Ali Khamenei as its new supreme leader, while President Donald Trump said higher oil prices were a “very small price to pay” for safety and peace.
Treasuries sold off on concerns over quickening inflation with benchmark US 10-year yields turning higher for the year. Australia’s policy-sensitive three-year yield surged to the highest since 2011, while German bund futures slumped to almost a 15-year low. Japanese bonds also fell, with yields on the 30-year and 40-year bonds rising about 11 basis points.
Selling swept across regions and asset classes as the geopolitical flareup added fresh stress to markets that are already under pressure from AI disruptions and worries about the potential for cracks in credit markets. The escalating crisis has left investors caught between the risk of renewed inflation stemming from elevated oil prices and signs of cooling in the US labor market.
“It’s fear positioning,” with people taking profits from markets and adopting a wait-and-see approach, said Anna Wu, cross-asset strategist at Van Eck Associates Corp. “Markets are pricing in an escalation of conflict.”
What Bloomberg strategists say…
“There’s an uncomfortable resonance for investors with the meltdowns that occurred last April across stocks and bonds, with the added potential danger that ending a war may be harder than switching off US trade levies was. The lack of clarity about how this conflict might end is going to make it harder and harder for markets to rebound.”
— Garfield Reynolds, MLIV Asia Team Leader. Click here for the full analysis.
Arab states across the Persian Gulf and Israel continued to face incoming missiles and drones from Iran, which said it had the capacity to sustain the war for months. Israel struck fuel depots in Tehran and threatened the Islamic Republic’s power grid, sparking a warning from the Red Crescent about toxic acid rain.
Trump is also weighing the option of deploying special forces on the ground to seize Iran’s near-bomb-grade uranium, as officials grow increasingly concerned the stockpile may have been moved, according to three diplomatic officials briefed on the matter.
“People are going defensive” with markets now trying to grasp how long will this war last, Jun Bei Liu, co-founder and lead portfolio manager at Ten Cap Investment, said in a Bloomberg TV interview. “Investors are worried what is going to happen to the global growth should the oil remain at the current levels.”
In other corners of the market, gold fell, pressured by a stronger US dollar and concerns over higher interest rates. Gold has come under pressure as spiking crude prices stoke inflation fears in the US, raising the likelihood that the Federal Reserve will leave interest rates unchanged for longer.
Bullion slipped 0.7% to $5,136 an ounce, while was little changed at $84.53 an ounce. The precious metals also eased some of their losses after the report on the coordinated release of oil reserves.
Another key area of focus was the strength of the dollar. The Bloomberg Dollar Spot Index rose as much as 0.7% on Monday, before paring gains.
“The dollar is the biggest beneficiary in the current environment, given the USD’s safe haven status and the US’s position as a net energy exporter,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “How much higher the dollar will go from here depends on the depth and duration of the conflict, which remains highly uncertain.”
US stocks are facing a growing risk of a sharp selloff this year as the escalating war in Iran hurts global markets, according to veteran strategist Ed Yardeni, updating his outlook for what he describes as “fast-moving times.”
Yardeni raised the probability of a market meltdown to 35% for the rest of the year, up from 20% previously. At the same time, he slashed the odds of a meltup — a rally driven more by investor enthusiasm than underlying fundamentals — to just 5% from 20%.
“The worst is yet to come in the stock market reaction,” said Michael O’Rourke, chief market strategist at JonesTrading. “I would expect more of a risk-off mood until we get some tangible positive news.”
Here’s what investors are saying:
Homin Lee, a senior macro strategist at Lombard Odier:
“Global investors are staring at an extremely wide range of possible scenarios for the ongoing conflict, and this reality alone is enough to prompt short-term risk aversion and defensive positioning changes. Volatility will be unavoidable and also relatively higher for the broader APAC equity market given its fundamental energy insecurity.”
Jung In Yun, chief executive officer at Fibonacci Asset Management Global:
“Geopolitical uncertainty is rising. A prolonged conflict is pushing oil prices higher and fueling inflation concerns, which is weighing on global risk assets and heightening volatility across markets. There are too many things to worry at the same time.”
Vey-Sern Ling, managing director at Union Bancaire Privee:
“The Middle East conflict has rapidly evolved over the weekend from a rapid de-escalation and contained scenario into one of potentially prolonged and severe disruption on oil production and distribution. In a global risk off environment, investors tend to shift away from emerging markets into perceived safer investment regions such as the US.”
Hironori Akizawa, a fund manager at Tokio Marine Asset Management:
“I honestly have no idea how long it will last, but I think they will reach an agreement some time. I believe that the negative market sentiment will bottom out at some point this month, but the situation will not call for rushing to buy soon.”
Gary Tan, portfolio manager at Allspring:
“Iran’s move to name a new leader despite pushback from the Trump administration raises the odds that current geopolitical tensions could prove more prolonged. For markets, it adds another layer of uncertainty at a time when investors are already concerned about stretched valuations in select sectors.”
Nick Twidale, chief markets analyst at AT Global Markets:
“Every day that goes by with no sign of a resolution gives a greater reason for oil to move higher. Will be interesting to see how Europe and the US fare once they open…I don’t think it’ll be nice.”
Some of the main moves in markets:
Stocks
S&P 500 futures fell 1.5% as of 3:09 p.m. Tokyo time Nikkei 225 futures (OSE) fell 5.3% S&P/ASX 200 futures fell 3.1% Japan’s Topix fell 3.7% Hong Kong’s Hang Seng fell 1.6% The Shanghai Composite fell 0.6% Euro Stoxx 50 futures fell 2.3% Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.5% to $1.1561 The Japanese yen fell 0.4% to 158.43 per dollar The offshore yuan fell 0.2% to 6.9174 per dollar Cryptocurrencies
Bitcoin rose 0.6% to $67,625.34 Ether rose 2.3% to $2,004.42 Bonds
The yield on 10-year Treasuries advanced five basis points to 4.19% Japan’s 10-year yield advanced two basis points to 2.180% Australia’s 10-year yield advanced nine basis points to 4.94% Commodities
West Texas Intermediate crude rose 12% to $101.65 a barrel Spot gold fell 0.9% to $5,124.60 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi, Ruth Carson, Natalia Kniazhevich, Anya Andrianova, Winnie Hsu and Marcus Wong.
©2026 Bloomberg L.P.
