Oil rose yesterday rose to a six-month high and stocks edged lower as escalating tensions in Iran weighed on risk sentiment.
Brent rose 0.7 percent to US$72.19 a barrel after US President Donald Trump said Iran had 15 days to reach a deal over its nuclear program and the US assembled an array of forces in the Middle East. That took this week’s gain for the commodity to more than 6 percent.
Equity-index futures for the US rose 0.3 percent and those for Europe gained 0.4 percent, signaling an improvement in sentiment.
Photo: AFP
US Treasuries held their gains from Thursday when investors sought haven assets, while gold hovered at about US$5,000 an ounce. Silver edged up.
Markets have stayed cautious as US threats toward Iran introduce a fresh layer of geopolitical risk, halting a cautious rebound in equities and damping risk appetite.
The renewed tensions threaten to derail a nascent recovery that had begun to take hold after weeks of volatility driven by concerns over artificial intelligence-related disruption across sectors and companies.
“Markets are taking it with a pinch of salt, but there’s still that possibility it could escalate, so you’ve got to cover yourself,” said Nick Twidale, chief market analyst at AT Global Markets. “It feels like President Trump is using it as a negotiating tactic. Obviously investors are naturally concerned because it could escalate.”
The US military is moving substantial forces to the Middle East, including two aircraft carriers, fighter jets and refueling tankers. That gives Trump the option for a major attack against Iran as he pressures the country to strike a deal over its nuclear program.
The US’ military buildup in the Middle East means Iran’s window to reach a diplomatic agreement over its atomic activities is at risk of closing, International Atomic Energy Agency Director-General Rafael Grossi said.
A potential war would put flows at risk from a region that pumps about one-third of the world’s oil.
“The buildup in US military assets does have a dual purpose of offering the option of a strike on Iranian military targets while also building pressure on Iran,” Tony Sycamore, a market analyst at IG Australia, wrote in a note.
“The current game of diplomatic ‘cat and mouse’ may extend over the next few weeks before a resolution is found, either of a diplomatic or military nature,” Sycamore added.
Wall Street gauges fell on Thursday, with alternative asset managers facing sharp declines after private credit fund Blue Owl Capital Inc restricted withdrawals from one of its funds.
Alongside Iran, traders were watching yesterday’s readings on the US economy and inflation, particularly after minutes of the US Federal Reserve’s latest meeting showed renewed concerns about price pressures.
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