(Bloomberg) — Stocks fell and crude oil surged as an escalation in the Middle East conflict unsettled global markets, prompting investors to trim risk exposure and seek haven assets. The dollar strengthened.
Asian shares fell 1.3%, while S&P 500 and Nasdaq 100 futures slid over 1% in their first response to the US-Israeli war against Iran. Benchmark Brent crude oil surged as much as 13% — before paring gains — as the conflict plunged the global crude market into turmoil with the effective closure of the Strait of Hormuz.
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As investors shunned risk, haven assets got a boost. Treasuries rose, with the 10-year yield falling to the lowest level since April and the 5-year yield declining to the lowest since October 2024. Gold advanced 1.6%, trading close to $5,360 an ounce. The dollar strengthened against almost all its Group-of-10 peers.
“History tells us that geopolitical shocks tend to produce sharp initial moves in oil and safe havens that often fade relatively quickly if the conflict proves contained,” said Josh Gilbert, market analyst at eToro Ltd. “Until there are clear signals of de-escalation, investors should expect elevated volatility across oil, gold, currencies, and equities throughout the week ahead.”
Shaken by fresh anxieties over artificial intelligence and potential cracks in credit, all while trading at historically high valuations, stock markets now must contend with the spiraling military action in Iran and the broader region that threatens to destabilize global shipping and limit travel. The impact on oil and inflation is of paramount concern in markets that last month saw US stocks post their worst drop since April.
Bloomberg Economics said that if the Strait of Hormuz is closed, then it could trigger a spike as high as $108. About one-fifth of global oil flows pass through the waterway, making it a critical energy choke point.
Digital signals indicate that oil-tanker traffic through Hormuz has nearly halted, and three ships were attacked near the mouth of the Persian Gulf, heightening fears that supplies could tighten. Iran has said it doesn’t intend to shut the passage.
“Markets are pricing a limited conflict, with broader investment implications still manageable unless escalation proves prolonged,” Adam Hetts, Global Head of Multi-Asset at Janus Henderson, wrote in a note. “As always, diversification and a long‑term perspective matter most when uncertainty peaks.”
Weiterlesen
What Bloomberg strategists say …
We have very big jumps in energy prices, as expected, but most other moves are relatively contained and almost everything has pared back from the opening extremes. There is no broad markets panic yet.
— Mark Cudmore, MLIV Executive Editor. For full analysis, click here.
Strategists at Barclays Plc warned against quickly buying any dip. Investors have grown accustomed to geopolitical flare-ups that fade fast, but this episode risks lasting longer, wrote Ajay Rajadhyaksha, the firm’s global chairman of research, citing the potential for US casualties, strikes on Iranian leadership and disruption to Hormuz traffic.
“The risk-reward doesn’t seem compelling,” he said. “If equities pull back enough (say over 10% in the S&P 500), there is likely to come a time to buy. But not yet.”
Any long-lasting oil price spike would muddy the case for Treasuries. While a flight to safety in markets would cause yields to fall, higher energy prices that feed through the economy and stoke inflation drive them higher.
“Even without a formal closure of the Strait of Hormuz, the reality is that vessels rerouting and sharply higher insurance premiums effectively tighten supply conditions,” said Dilin Wu, a strategist at Pepperstone. “That alone embeds a fresh inflationary impulse into the global economy.”
WATCH: Bloomberg Intelligence’s Mike McGlone explains what the US and Israeli strikes on Iran mean for oil and commodities prices.Source: Bloomberg
The possibility of prolonged turmoil in the Middle East and the ripple effects of higher oil prices are giving money managers fresh reasons to sell equities and shift into safety. Rich valuations across global equities and credit also make it easier for investors to trim risk.
“This is all coming at a fragile time as investors are becoming more cautious,” said Dec Mullarkey, managing director at SLC Management. “US equity markets are already very sensitive to threats of technology disruption and emerging credit stress, so the prospects of higher commodity prices could force a selloff as investors rein in risk.”
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 1% as of 9:26 a.m. Tokyo time
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Hang Seng futures fell 0.5%
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Japan’s Topix fell 2.7%
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Australia’s S&P/ASX 200 fell 0.4%
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Euro Stoxx 50 futures fell 1.9%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.3% to $1.1773
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The Japanese yen fell 0.2% to 156.37 per dollar
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The offshore yuan fell 0.2% to 6.8758 per dollar
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The Australian dollar fell 0.7% to $0.7068
Cryptocurrencies
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Bitcoin rose 0.5% to $66,025.38
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Ether rose 1% to $1,949.66
Bonds
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The yield on 10-year Treasuries was little changed at 3.93%
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Japan’s 10-year yield declined four basis points to 2.070%
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Australia’s 10-year yield declined six basis points to 4.59%
Commodities
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West Texas Intermediate crude rose 7.1% to $71.77 a barrel
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Spot gold rose 1.5% to $5,359.66 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carmeli Argana, Natalia Kniazhevich, Sid Verma and Muyao Shen.
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