Bonds & Stocks Increase in Value as Oil Drops – Europe Market Wrap
US markets rose as hope grew that the Middle East war was nearing an end, bringing Brent briefly below $100 per barrel and supporting Treasuries. The Dollar experienced its largest loss in a week.
The S&P 500 is expected to rise 0.5% to its highest daily gain since May, boosted by Trump’s statement that the US would conclude the conflict with Iran in two to three weeks. European equities soared 2%, while Asian stocks rose 4.8%.
Brent plummeted 5.4% before paring its losses as the Strait of Hormuz remained largely closed and missile and drone assaults persisted across the Gulf. Traders cut their wagers on tighter monetary policy, driving two-year Treasury rates down 3 bps to 3.76%. Comparable UK gilt yields fell 8 bps, to 4.32%.
Even if the war ends within Trump’s deadline, it will take time for oil flows to restore to normal, particularly since several energy installations were damaged during the battle. Trump’s team has also hinted that reopening the Hormuz strait, which transports around 20% of global crude, may not be required to end the conflict.
Trump urged other governments to assume control of the Strait of Hormuz. So far, the UAE is the only Gulf Arab country that has stated that it will join a naval force to attempt to reopen the strait or provide escorts. Bahrain is working on a UN Security Council resolution authorising such a task group.
