As Oil Surpasses $100, Stocks Decline and Yields Rise – Europe Market Wrap
After the weekend’s standstill in US-Iran peace talks, Trump authorised a blockade of the Strait of Hormuz, sending oil prices back above $100 per barrel.
Brent rose 7.7% to surpass $101. The S&P 500 was expected to dip 0.6% at the open. Bonds pared their initial losses, with the two-year Treasury yield rising 2bps to 3.82%. The Dollar climbed 0.3%, its largest gain in almost a week. Gold was somewhat lower at $4,710 per ounce.
Oil and gas flows through the Strait of Hormuz continue under scrutiny, with Trump’s limitations on vessels calling at Iranian ports threatening to exacerbate a global energy shock. Nonetheless, the relatively slight retreat in riskier assets signalled that investors remained cautiously confident that a resolution was still possible.
In Europe, Hungary’s forint rose to a four-year high, and local stocks reached new highs after PM Orban lost Sunday’s election, with the opposition’s triumph likely to free billions of euros in EU funds. Europe’s Stoxx 600 fell 0.7%, tracking losses in the US and Asia.
The recent climb in crude, combined with a significant increase in March US consumer prices, is refocusing the bond market’s attention on inflation. On Monday, Japan’s 10-year yield reached its highest level since 1997 before trimming its gains. European government bonds posted moderate losses. In the US, money markets see fewer than one-in-five chances of a rate cut by December.
