- Kospi falls before cutting losses as risk sentiment weakens.
- The Nikkei 225 falls ~0.3% amid a cautious reaction from the Asian market.
- The US Dollar Index rises ~0.5% to hit a one-week high.
Benchmark U.S. oil prices rebounded above $100 a barrel on Monday after U.S.-Iran peace talks failed to make progress and U.S. President Donald Trump ordered a blockade of Iranian ports.
Shortly after trading began, a barrel of West Texas Intermediate for May delivery rose about 8% to $104.50, while June delivery of international benchmark Brent rose 7% to $102.
In early trading in Asia, South Korea’s Kospi benchmark fell 2%, before recovering slightly, while Japan’s Nikkei fell 0.3%.
Oil prices had plunged and stocks soared last week after Trump agreed to a two-week ceasefire brokered by Pakistan, even though his weakness quickly became apparent as Israel continued to attack Lebanon and the Strait of Hormuz remained effectively closed.
The dollar also strengthened to the highest level in a week in a broad rally against most of its peers in early Asian trading on Monday.
The US dollar index, which measures the dollar’s strength against a basket of six currencies, rose as much as 0.5% to $99.187, its highest level since April 7.
The euro was down 0.5% at $1.1667, while the pound sterling fell 0.6% at $1.3383, while the Australian dollar was down 0.8% at $0.7014 and the New Zealand dollar was down 0.7% at $0.5798.
US President Donald Trump said on Sunday that the US Navy would begin blockading the Strait of Hormuz after marathon talks with Iran failed to reach a deal to end the war, jeopardizing a fragile two-week ceasefire.
US Central Command said US forces would begin implementing the blockade of all maritime traffic entering and leaving Iranian ports starting at 10 a.m. ET (7 p.m. Pakistan Standard Time) on Monday.
“This morning’s early and thin FX trading is showing risk-off sentiment, with a broad-based rally in the dollar in response,” Westpac analysts wrote in a research note.
