By Dow Jones Newswires Staff
U.S. stock futures tumbled and the dollar strengthened as oil jumped above $100 for the first time in around four years. Brent crude prices climbed 15% after some major Gulf producers curbed production, while the appointment of Mojtaba Khamenei as Iran's new supreme leader muddied the outlook for a near-term resolution to the Middle East conflict.
Oil paired some of its earlier gains after a Financial Times report that G-7 finance ministers would meet to consider freeing up strategic reserves. However, the sharp rise was enough to spark a fresh wave of broad-based selling in Asian and European equity markets. Agricultural commodities also jumped, with wheat trading close to two-year highs.
U.S. Treasury yields rose as inflation fears continued to surmount growth worries--even after a disappointing U.S. jobs print Friday. Sovereign bonds in the eurozone and the U.K. sold off steeply, with investors now betting on the Bank of England lifting interest rates before the end of the year.
--Oil prices surged to their highest level since mid-2022 as the Strait of Hormuz remained effectively closed. Brent crude climbed 15% to $106.21 a barrel after reaching $119.50, while WTI was up 12% to $92.33 a barrel, having hit $103.67 a barrel earlier in the session. "The combination of these production shut-ins and no signs of de-escalation in the war means the market is having to aggressively price in a prolonged supply disruption," analysts at ING said.
Meanwhile, European natural-gas prices extended last week's gains. The benchmark Dutch TTF contract climbed 19% to 63.64 euros a megawatt-hour, after reaching 69.50 euros earlier in the session. The surge followed the forced closure of Ras Laffan in Qatar, the world's largest liquefied-natural-gas complex.
--U.S. blue-chip indexes all fell sharply premarket in early European trade. Futures for the Dow Jones Industrial Average and the tech-heavy Nasdaq were both down around 1.5%, while the S&P 500 was down 1.3%. U.S. banks looked set to follow their European peers lower, with Citigroup and Goldman Sachs falling 2.9% and 2.2% premarket, respectively.
--Asian equities slumped on Monday on the hike in oil prices. South Korea and Taiwan, both massive net oil importers, were among the top losers. South Korea's Kospi lost 6% while Taiwan ended 4.4% lower. Japan's Nikkei Average Index declined 5.2%. China's indexes were all about 0.7% lower, potentially shielded by better-than-expected CPI data. The Hang Seng was down 1.8%.
--Banks, industrials and technology companies fell as European blue-chip indexes all opened sharply lower. Spain's IBEX 35 fell 3% as major banks slumped--Santander was down 4.4%. Industrials led the fallers in the German DAX--down 2.7%--as Siemens Energy slid 7.25%. The French CAC 40 was down 2.6%. Banks also pushed the FTSE MIB lower, with the Italian index down 2.5%. In London, the FTSE 100 fell 1.7% as industrial giant Rolls Royce slid 5.1%. Losses in the index were softened somewhat by gains for oil majors BP and Shell. The Dutch AEX was down 1.9% as ASML--Europe's most valuable company--fell 5%.
--The dollar remained elevated after reaching a three-month high overnight. The currency benefits from higher oil prices as the U.S. is a net oil exporter, while the market has scaled back interest-rate-cut expectations for the Federal Reserve due to the potential inflationary impact. The DXY dollar index rose 0.4% to 99.389 after reaching a high of 99.695 overnight.
The Swiss franc trades near its highest level against the euro since 2015 due to its safe-haven status, even as the Swiss National Bank warned it is increasingly ready to use currency interventions.
--Investors sold U.S. Treasurys, extending last week's trend. Bonds failed as safe havens last week as the war skewed the shock more toward inflation and wider budget deficits than slower growth in the U.S., Barclays's rates strategists Anshul Pradhan and Demi Hu said in a note. "With soft economic data taking a back seat, conflict duration is key." The two-year Treasury yield rose 5.9 basis points to 3.611% and the 10-year yield was up 5.7 basis points at 4.187%, according to Tradeweb.
The German 10-year Bund yield jumped to a 12-month high of 2.931%, while yields on U.K. 10-year government bonds climbed to a six-month high of 4.772%.
--Bitcoin rose but held below $70,000 as overall sentiment remained cautious. Bitcoin climbed 0.3% to $67,444 after reaching a one-week low of $65,639 overnight.
--Gold prices fell 1% on fears that rising energy prices could stoke inflation and delay interest-rate cuts in the U.S. In early trading, New York futures were down 1% to $5,105.70 a troy ounce, while the U.S. dollar index rose 0.3% to 99.27, making dollar-denominated commodities more expensive for overseas buyers.
Write to Barcelona Editors at barcelonaeditors@dowjones.com
(END) Dow Jones Newswires
03-09-26 0521ET
