(March 11): Oil pared all gains and stocks rose as risk sentiment got a lift from a Wall Street Journal report that said the International Energy Agency has proposed the largest release of crude oil reserves in its history. The dollar edged lower.
The release would exceed the 182 million barrels of oil that IEA member countries put onto the market in two releases in 2022 when Russia launched its full-scale invasion of Ukraine, the report said. Brent crude, which rose almost 3% to just over US$90 a barrel, slid more than 1% to trade just below US$87 a barrel after the report.
On Tuesday, oil suffered its steepest one-day slide in four years amid mixed signals from the Trump administration on the Iran war. Volatility spiked as US Energy Secretary Chris Wright erroneously posted — and then deleted — a message that the US Navy had escorted an oil tanker through the Strait of Hormuz, only for the White House to concede that no such operation had occurred.
Equity markets also experienced volatility, with the S&P 500 Index fluctuating between gains and losses, only to end the session down 0.2%. Asian shares rose 0.7% while sentiment for the artificial intelligence trade got a boost as Oracle Corp shares jumped 8% in after-market trading on better-than-expected revenue. US equity-index futures also extended gains following the WSJ report.
The swings in energy markets added to pressure on Treasuries, with bond traders starting to bet more on losses, dumping bullish futures positions as oil’s surge sparked inflation worries. The dollar weakened against almost all its Group-of-10 peers.
See also: Trump and Iran strike defiant tone as oil markets see little relief
“Markets are still skittish over the Middle East developments,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group. “Hence, any news of oil release from strategic reserves, whether from the IEA or the US or the G7 provides a bit of near-term relief for oil markets.”
The conflict, in its second week, showed no signs of easing with US President Donald Trump warning Iran against laying mines in the key energy chokepoint after news reports suggested it was either preparing to or had already begun doing so. Meanwhile, the Group of Seven nations asked their main energy agency to prepare scenarios for the release of emergency oil reserves.
Brent crude prices have risen over 40% since the start of the year as the effective closure of the strait, which typically handles a fifth of global oil flows, forces producers to curtail output. Tuesday’s move lower came on expectations that world leaders would intervene before the worst of any supply shock emerges.
See also: Brent oil trades near US$100 as Iran vows to keep Strait of Hormuz closed
“While traders welcomed the sudden drop in oil prices, the geopolitical backdrop remains far from stable, leaving markets vulnerable to further volatility,” said Fawad Razaqzada at Forex.com. “Ultimately, the biggest factor for markets will be whether energy supplies from the region resume normally.”
In other corners of the market, gold extended gains from the prior session, trading over US$5,200 an ounce. Treasuries steadied, with the yield on the benchmark 10-year falling one basis point to 4.15% on Wednesday.
“The conflict in the Middle East and related headlines are still the major source of fluctuations in markets, with equities, oil, and rates all spending another day trying to find equilibrium,” said Sameer Samana at Wells Fargo Investment Institute. “We would continue to try and look through those near-term headlines.”
As Wall Street was rattled by oil volatility, traders geared up for inflation data due after the latest jobs report challenged perceptions the labour market is stabilising.
The consumer price index report on Wednesday is projected to show a core inflation measure, which strips out volatile food and energy costs, rose just 0.2% last month. That would suggest some easing in price pressures before the outbreak of the war in Iran introduced new uncertainty about the inflation outlook.
While the report has lost some of its importance given recent moves in energy prices, any additional signs of inflationary pressures could sound the “death-knell” for rate cut expectations this year, according to David Morrison at Trade Nation.
Some of the main moves in markets:
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
Stocks
- S&P 500 futures rose 0.3% as of 9.34am Tokyo time.
- Hang Seng futures were little changed.
- Nikkei 225 futures (OSE) rose 1.5%.
- Japan’s Topix rose 1.6%.
- Australia’s S&P/ASX 200 rose 0.6%.
- Euro Stoxx 50 futures fell 0.3%.
Currencies
- The Bloomberg Dollar Spot Index was little changed.
- The euro was little changed at US$1.1621.
- The Japanese yen was little changed at 158.02 per dollar.
- The offshore yuan rose 0.1% to 6.8720 per dollar.
- The Australian dollar rose 0.2% to US$0.7132.
Cryptocurrencies
- Bitcoin fell 0.5% to US$69,886.26.
- Ether fell 0.5% to US$2,033.03.
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.15%.
- Japan’s 10-year yield was unchanged at 2.180%.
- Australia’s 10-year yield advanced one basis point to 4.86%.
Commodities
- West Texas Intermediate crude fell 0.7% to US$82.86 a barrel.
- Spot gold rose 0.3% to US$5,208.08 an ounce.
Uploaded by Arion Yeow
