Morning Note: A Round-up of Global Financial Market News
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A sell-off in stocks, gold, and bonds deepened as the US and Iran hardened their rhetoric and signalled a potential escalation to their conflict, which is entering its fourth week.
Brent crude futures are currently trading above $113 a barrel after climbing to as high as $115 overnight, as investors assessed President Trump’s ultimatum urging Iran to reopen the Strait of Hormuz – crucial for the flow of oil and gas from the Middle East. Over the weekend, Trump warned he would “obliterate” major Iranian power plants if the waterway is not reopened to shipping by late Monday. In response, Tehran said it would target US and Israeli assets across the region, including energy, information technology and desalination infrastructure, if its own energy facilities were struck. More than 40 energy assets across nine countries in the Middle East have been ‘severely’ damaged by the war, the IEA’s Fatih Birol said.
The yield on the US 10-year Treasury note has risen above 4.4%, reaching an eight-month high as surging oil and gas prices fuel inflation concerns and reduce expectations for Federal Reserve rate cuts this year. Last week, the central bank held its policy rate steady as expected, with Chair Jerome Powell noting it was too early to gauge the full economic impact of the conflict.
Precious metals extended their recent decline: gold was down 8% this morning to $4,100 an ounce. Major economies face pressure to boost liquidity, including through gold sales, to offset the war’s impact, while other investors use the profits from gold built up over the last few years to cover losses in bonds and equities.
In Asia this morning, equities slumped – Nikkei 225 (-3.5%); Hang Seng (-3.5%); Shanghai Composite (-3.6%) – and the US market is currently forecast to open down 1% this afternoon.
The FTSE 100 is currently 1.5% lower at 9,773, while Sterling trades at $1.3310 and €1.1530. PM Keir Starmer will hold an emergency meeting today with senior ministers and the Bank of England Governor on the Iran crisis and its economic impact at a time when 10-year gilt yields have jumped above 5%.
Source: Bloomberg
