EMEA Morning Briefing : Oil Jumps as Trump's Hormuz Blockade Nears

MARKET WRAPS

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Trading updates from LVMH, Galp Energia

Opening Call:

European stock futures fell early Monday. Asian stock benchmarks fell; the dollar rose; Treasury yields were higher; oil jumped; while gold futures fell.

Equities:

Stock futures point to a lower open in Europe on Monday, as the collapse of the U.S.-Iran peace talks poured cold water on hopes of an end to the fighting.

Meanwhile, U.S. Central Command forces said they will implement a blockade of all maritime traffic entering and exiting Iranian ports on Monday morning.

"For today, financial markets may remain defensive as the U.S. and Iran ended peace talks in Pakistan without an agreement and Trump announced a full naval blockade of the Strait of Hormuz, putting a fragile cease-fire at risk," UOB said in a research report.

Forex:

"In a drawn--out [U.S.-Iran] conflict with sticky rather than spiking oil, FX should rotate back to terms-of-trade divergence, supporting energy exporters while pressuring importers," OCBC strategists said.

Bonds:

The failure of peace talks between the U.S. and Iran has raised fears of an energy supply shock and accelerating inflation, driving Japan's benchmark government bond yield to a nearly 30-year high. The yield on 10-year JGBs rose to 2.490%, its highest level since June 1997, according to data provider Quick.

Many investors expect the Bank of Japan to raise interest rates as early as this month to prevent higher energy prices from derailing the nation's fragile economic recovery, expectations that have led to a rise in government bond yields. Concerns about fiscal policy expansion have added to the rise in bond yields too.

Energy:

A shorter timeline to onshore inventory "angst" is likely amid the U.S. announcement of a blockade on Iranian oil exported via Strait of Hormuz, TD Securities' Ryan McKay said.

The blockade will potentially eliminate around 2 million barrels per day of Iranian supply that had continued to flow during the U.S.-Iran conflict. This supply loss would increase crude oil deficit to over 5 million barrels per day, after "taking into account all current offsets such as current refiner run cuts, bypass flows and SPR flows," McKay said.

"This would shorten the timeline to record low onshore inventories to July rather than August," he added.

Metals:

Gold fell early Monday as the dollar strengthened after U.S.-Iran peace talks over the weekend collapsed.

Also, the failure of the peace talks has spurred a surge in crude oil prices, which likely has renewed inflationary pressures and concerns over potential central banks' rate increases that could diminish the allure of the non-interest-bearing precious metal.

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Aluminum edged higher in Asian trade after peace talks between the U.S. and Iran failed over the weekend.

Aluminum is among the most exposed to the conflict, given that the region supplies around 9% of global aluminum and meets about 18% of global demand excluding China, said ANZ Research.

Elevated prices had eased last week after a cease-fire was announced amid reduced expectations for sustained supply disruptions, ANZ added.

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Iron ore prices are rose in early Asian trading as Chinese steel mills resumed production. Significant drops in raw material prices have boosted steel mill profits, helping boost production of molten iron, Nanhua Futures said.

With higher iron-ore consumption and low inventory at steel mills, there is room for further restocking, Nanhua added.

TODAY'S TOP HEADLINES

White House Fields Warnings About Iran War's Economic Hit

One big nonmilitary question has loomed over President Trump's attacks and now cease-fire in Iran: Would the U.S. economy take a hit from a prolonged war?

Since earlier this year, the president and advisers have been privately hearing from cabinet officials, political allies and corporate leaders about what the war could do to Wall Street and Main Street if it didn't conclude within a tight time frame. Many cautioned against-or drew up scenarios for-a more-extended fight.

The Market's Next Test Is Already Here

Investors are just starting to shake off a weekslong rout brought on by conflict in the Middle East and surging oil prices. But the next test for stocks has already arrived.

Monday will bring the start of the first-quarter earnings season, with reports due this week from the country's largest financial firms, including Goldman Sachs, BlackRock and JPMorgan Chase.

Hungary's Orbán Ousted in Landslide Election Defeat

BUDAPEST-Prime Minister Viktor Orbán suffered a landslide defeat in Hungary's election on Sunday, ending the 16-year rule of a politician who had become a standard-bearer for populist right-wing leaders worldwide.

With 98% of the votes counted, Péter Magyar's opposition party was leading with 53.6% of the votes compared with 37.8% secured by Orbán's party, one of the largest winning margins in Hungary's 37 years since the collapse of communism.

U.S. Threat to Blockade Hormuz Sets Up Risky New Showdown

President Trump's announcement that the U.S. military would blockade the Strait of Hormuz sets up a risky new showdown that could draw American forces into a prolonged struggle to control the strategic chokepoint while compounding the global economic damage caused by the conflict.

Hours after U.S. peace talks with Iran broke down in Pakistan, Trump said that the Navy would begin the blockade, "seek and interdict" vessels that had paid Iran to get through the strait, and then start clearing the waterway of sea mines. "He added that any Iranian forces that fired on U.S. troops or commercial shipping would be "BLOWN TO HELL."

AI Is Using So Much Energy That Computing Firepower Is Running Out

The artificial intelligence gold rush is rapidly drying up the supply of the one resource that AI developers can't do without: computing power.

The sharp capacity crunch has caused consternation among power users, forced companies to scuttle products and led to reliability problems. The issues are a warning sign for the AI boom, as they may limit the utility of powerful new AI tools just as massive amounts of users have begun to rely on them to boost productivity.

Big Pharma Is Turning to China for the Newest Drug Ideas

Finding innovative ways to treat cancer is Pfizer's biggest priority so to boost cutting-edge technologies, Pfizer executives went to Shenyang, China. There, last summer, Pfizer paid $1.25 billion to China's 3SBio for rights to a cancer drug candidate.

Not long ago, China was a backwater for drug research. Its companies made pharmaceutical ingredients or lower-cost generic drugs. Its patients offered an opportunity for big drugmakers to sell medicines developed in the West.

Meta Banks on AI to Clear the Smoke of Social-Media Lawsuits

Meta Platforms' big AI moment is overshadowing its "big-tobacco" moment. But this is a tough time to have any sort of cloud over the business that is paying for the social network's attempt to remake itself into an artificial-intelligence superpower.

Meta's announcement of its new Muse Spark model this week comes nearly a year after it delayed the rollout of an advanced version of its last model family known as Llama. It also represents the first release from the Meta Superintelligence Labs that the company rushed to build up last year after Llama misfired.

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Expected Major Events for Monday

04:30/NED: Feb International trade

05:00/FIN: Feb Balance of Payments

06:30/HUN: Feb Construction

07:00/CZE: Feb Import & export price indices

07:00/SVK: Feb Construction production

07:00/TUR: Feb Balance of Payments

08:00/CZE: Feb Monthly Balance of Payments

09:00/POR: Mar CPI

12:00/POL: Feb Balance of Payments

16:59/AUT: Apr OPEC Monthly Oil Market Report

23:01/UK: Mar BRC-KPMG Retail Sales Monitor

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

04-13-26 0018ET