- Brent crude oil rises ~7% to $96.85 in early Asian trading.
- S&P 500 futures fall ~0.9% as risk sentiment weakens.
- The Euro falls 0.3% and the Yen weakens ~0.2% against the US Dollar.
Oil prices rose, the U.S. dollar rose and stock futures fell on Monday as investors faced conflicting messages about the Iran war and news that the Strait of Hormuz was closed again.
In early Asian trading, Brent crude futures rose about 7% to $96.85 a barrel, and S&P 500 futures fell about 0.9%.
The euro was down 0.3% at $1.1735 and the yen was down about 0.2% at 158.95 per dollar.
Iran rejected new peace talks with the United States, its state news agency reported Sunday, hours after US President Donald Trump said he would send envoys for talks to Pakistan and launch new attacks on Iran unless it agreed to his terms.
Tensions also rose after the United States said it had seized an Iranian cargo ship trying to break its blockade.
The dollar’s rise lifted it from the lows it hit on Friday when Iran’s announcement that it would open the strait sent stocks rising and oil prices plunging.
“While clearly the news about the new closure of the Strait of Hormuz is not good, the ships being attacked is not good, Trump again with his threats towards Iranian infrastructure is not good, the market is seeing this as a case of: in short, the two sides are still talking,” said Michael Brown, senior research strategist at Pepperstone in London.
“From a stock perspective, I would probably say we undid a good portion of the gains we saw on Friday, which in hindsight was the market getting a little ahead of itself.”
Iran’s announcement that it would open the Strait sent stocks and bonds higher on Friday and sent oil prices tumbling as investors bet on an end to a seven-week war that closed the Strait of Hormuz, a vital artery for global crude and gas shipments.
“Now that Hormuz is closed again after about 12 hours of being open, most of the move we saw on Friday (in bonds) would probably be expected to reverse,” Brown said.
“If it is actually confirmed that Iran will not attend (the talks), we will see a much more risk-averse reaction than what we are seeing now.”
Markets rose last week
Wall Street indexes hit record highs on Friday, while bonds, which, unlike stocks, are still far from recouping their losses since the war, rose as oil prices fell and investors reduced their bets on rate hikes by the European Central Bank and the Bank of England.
U.S. stocks have been supported over the past week by expectations of strong first-quarter earnings, most of which come this week.
The benchmark 10-year U.S. Treasury yield hit its lowest level since mid-March on Friday.
The dollar fell as safe-haven assets lost their shine late last week, sending the dollar index, which measures the dollar against a basket of currencies including the yen and euro, to its lowest level in seven weeks. Early on Monday it rose 0.2% in Asian trading.
“The risk is that the market is getting ahead of itself… The Nasdaq’s 13-day rally is extreme. The dollar index has fallen for nine of the last 10 sessions,” Marc Chandler of Bannockburn Capital Markets said in a note on Sunday.
