Oil Climbs as US-Iran Tensions Rekindle Inflation Fears – Asia Market Wrap

Oil rose for a second straight day while Asian stocks weakened as tensions between the US and Iran escalated, reviving inflation concerns and increasing expectations of a Federal Reserve interest-rate hike.

Brent crude climbed as much as 2.8% to $85.64 after President Donald Trump reinstated the US blockade of Iranian vessels transiting the Strait of Hormuz. Trump also called for a 20% reimbursement on all other cargo passing through the waterway.

Treasuries and the dollar were little changed as traders awaited Tuesday’s US consumer price index report. Money markets priced in roughly a 50% chance of a Fed rate hike in July after Governor Christopher Waller said policymakers may need to raise rates further to contain inflation.

MSCI’s Asia Pacific equity index was little changed in volatile trading, with South Korea’s Kospi swinging between gains of as much as 2.5% and losses of up to 5.3%. Equity futures pointed to a weaker open for European markets.

The latest exchange of attacks between the US and Iran dashed hopes of a near-term reopening of the Strait of Hormuz. The renewed escalation adds to uncertainty during a pivotal week for markets, with earnings season beginning alongside US inflation data and Federal Reserve Chair Kevin Warsh’s congressional testimony, both expected to shape expectations for the path of interest rates.