On Thursday, oil prices experienced a significant increase, while global equity markets showed a mixed response amid fluctuating trade conditions influenced by the ongoing conflict involving Iran.
European stock markets managed to reduce their losses, supported by some major indexes on Wall Street and a rebound in U.S. bond prices, following reports that Iran was formulating a monitoring agreement with Oman for traffic in the Strait of Hormuz.
In contrast, oil prices spiked nearly 8%, with U.S. crude prices rising over 11%. This surge followed a high-profile address from U.S. President Donald Trump, in which he stated that the U.S. would respond to Iran “extremely hard” in the upcoming weeks, asserting their intent to revert the nation to a primitive state.
U.S. stock markets concluded the trading day with mixed results, reflecting the volatility as investors prepared for the Good Friday holiday. Meanwhile, gold prices declined as the U.S. dollar strengthened.
Government bond yields increased, fueled by speculation that a rise in inflation could compel central banks to either hike interest rates or maintain their current rates. The dollar index, which evaluates the U.S. currency against a selection of others including the yen and euro, rose by 0.44%.
According to Felix-Antoine Vezina-Poirier from BCA Research, “In the last 48 hours, there has been a flurry of statements from Tehran and Washington, some indicating a potential for de-escalation. Our GeoMacro strategists advise focusing on the facts: shipping traffic through Hormuz has increased recently, and Iran is purposefully redirecting its focus from GCC targets to Israeli ones.”
Globally, MSCI’s stock index fell 0.35% to 993.18. In the U.S., the Dow Jones Industrial Average decreased by 0.13% to 46,504.67, while the S&P 500 managed to gain 0.11% to reach 6,582.69, and the Nasdaq Composite rose 0.18% to 21,879.18.
During a closely monitored speech on Wednesday, Trump indicated that U.S. military actions against Iran would escalate over the next two to three weeks, shortly after suggesting to Reuters that the U.S. would exit Iran swiftly.
The pan-European STOXX 600 index and the broader FTSEurofirst 300 both dipped by 0.2%. South Korea’s Kospi index saw a notable decline of 4.7%.
Prashant Newnaha, a senior rates strategist at TD Securities, commented, “The critical issue remains whether the Strait of Hormuz will reopen soon.” Trump had also remarked earlier that the U.S. did not rely on this vital oil passage.
Spot gold prices fell by 1.85% to $4,669.05 per ounce, with U.S. gold futures settling down by 2.8% at $4,679.70.
In India, the central bank’s decision to prohibit trading in non-deliverable forwards aimed at stabilizing the rupee, which had been hitting record lows, resulted in a 2% rebound of the currency, although analysts expressed doubts about the sustainability of this recovery.
Brent crude futures ended the day up 7.78% at $109.03 per barrel, while U.S. West Texas Intermediate closed up 11.41% at $111.54.
Jon Withaar from Pictet Asset Management noted, “The expectation of two to three more weeks of military action, along with the possibility of ground troops not being ruled out during Trump’s address and reiterated threats to strike infrastructure, will keep the market on high alert.”
The yield on benchmark U.S. 10-year Treasury notes decreased by 1.6 basis points to 4.305%, while the yield on the two-year note, which typically aligns with Federal Reserve interest rate expectations, remained unchanged at 3.803%. Following a three-day dip, eurozone benchmark Bund yields saw an uptick, with the German 10-year yield rising by 0.1 basis points to 2.996%.
