(April 6): Crude oil extended its recent gains after President Donald Trump signalled an escalation in the Iran war, heightening the risk of an energy shock already weighing on the global economic outlook. Gold fell.
Brent climbed 1.9% to trade above US$111 a barrel, as Trump renewed threats early Sunday to attack Iranian infrastructure if the key energy-shipping route through the Strait of Hormuz remains closed. He followed it later with another that said: “Tuesday, 8:00 P.M. Eastern Time!” with no further explanation.
Stocks wavered with futures contracts for the S&P 500 erasing early losses to trade little changed, while a gauge of Asian shares gained 0.3%. South Korean stocks rose 1.5% after the government hinted at the possibility of an extra budget, while Japanese equities advanced after the country secured enough supplies to cover at least four months of its demand for naphtha.
The fallout from the Iran war has rapidly darkened the economic outlook by threatening to cool growth and push up already elevated inflation, roiling bets on whether the Federal Reserve will resume cutting interest rates later this year. Attention remains firmly on energy prices and the closure of the Strait of Hormuz — a waterway crucial for the flow of oil from the Middle East.
“The prediction game remains quite tricky for investors,” said Homin Lee, a strategist at Lombard Odier in Singapore. “Investors’ focus will squarely be on military actions on both sides of the Persian Gulf and whether or not Hormuz vessel crossings can improve further despite these attacks.”
Investors will watch for the impact of the surge in crude oil when monthly US inflation data is released Friday. The roughly US$1-per-gallon increase in US gasoline pump prices probably drove the March consumer price index up 1%, the most since the post-pandemic inflation surge in 2022, according to an economist survey before the report is published.
See also: Asia shares gain as volatile week draws to a close
Gold fell 1% to about US$4,630 an ounce and silver dropped 1% to around US$72 an ounce. Gold has slumped more than 12% since the conflict began in late February, as spiking energy prices have stoked fears of inflation and reduced the prospects for rate cuts that typically benefit non-yielding precious metals.
Elsewhere, the Bloomberg Dollar Spot Index rose 0.1%, while Treasury futures edged lower. Financial markets are closed in a number of regional economies Monday including China and Hong Kong.
Opec+ warned after a weekend meeting that damage to energy assets from the war would have a prolonged impact on oil supply even after hostilities ended. Members of the producers’ group approved an increase in output quotas — a signal of intent, given flows from the Persian Gulf remain throttled.
See also: Stocks and bonds tumble as US crude hits US$110
Treasuries had fallen on Friday after a stronger-than-forecast reading on March employment prompted traders to pare bets on Fed rate cuts.
“This makes it somewhat less likely that the fed will be pushed into ‘bad news’ cuts motivated solely by labour weakness,” Krishna Guha, head of central bank strategy at Evercore ISI, wrote in a note. “The fall in unemployment pre-war does edge up the risk of a Fed hike, but we continue to think this is very unlikely in 2026.”
Meanwhile, Iran’s continued attacks damaged Kuwait’s oil headquarters and shut down an Emirati petrochemicals plant. Fifteen ships have passed through the Strait of Hormuz with permission from Iran, semi-official Fars news agency reports, citing the latest data on strait traffic.
Trump has previously dialled back his escalation threats, including two weeks ago before markets reopened for the week. Trump also said he plans to hold a news conference at 1pm New York time on Monday.
“Trump is probably serious in his expressed desire to step away after two or three more weeks,” Lombard Odier’s Lee said. “But the obvious path-dependency inherent in the conflict suggests that his attempt to carry out a final round of aggressive strikes can backfire significantly for the markets.”
Some of the main moves in markets:
Stocks
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- S&P 500 futures rose 0.1% as of 10.02am Tokyo time
- Nikkei 225 futures (OSE) rose 1.3%
- Japan’s Topix rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1513
- The Japanese yen was little changed at 159.65 per dollar
- The offshore yuan was little changed at 6.8873 per dollar
Cryptocurrencies
- Bitcoin rose 2.1% to US$69,031.13
- Ether rose 2.6% to US$2,121.42
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.36%
- Japan’s 10-year yield advanced two basis points to 2.400%
Commodities
- West Texas Intermediate crude rose 0.4% to US$112.02 a barrel
- Spot gold fell 1% to US$4,629.96 an ounce
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