Oil Back Above $100, U.S. Futures Up as U.S.-Iran Tensions Escalate

By Dow Jones Newswires Staff

Brent crude oil rose back above $100 a barrel after the U.S. and Iran exchanged military strikes in the Strait of Hormuz, further threatening an already fragile cease-fire.

Iran launched attacks at American warships in the strait, the U.S. said, prompting the U.S. to respond with strikes on Iranian military sites, casting doubt on peace negotiations. The dollar strengthened in response.

In equity markets, U.S. futures diverged from falling stocks in Asia and Europe, with all of its major indexes in the green as investors looked past the rise in escalations.

For the day ahead, investors await nonfarm payrolls data for April for insight into the health of the U.S. labor market. Investors in U.K. government bonds and sterling will track the results of local elections throughout Friday, with the ruling Labour Party expected to suffer heavy losses.

--Oil prices trimmed earlier gains but remained elevated after the U.S. and Iran exchanged fire. In early European trading, Brent crude for July delivery was up 0.6% to $100.67 a barrel, while WTI futures for June rose 0.4% to $95.16 a barrel. The benchmarks rose more than 2% earlier in the session. "Brent crude trades firmer, holding above $100 after another volatile week that saw an almost $20 trading range as Middle East headlines swung sentiment between optimism and frustration," analysts at Saxo Bank said.

--U.S. futures for the S&P 500 were up 0.3% while futures for the Dow Jones Industrial Average rose 0.1%. The tech-heavy Nasdaq gained 0.5% premarket.

--Asian markets largely fell Friday. Japan's Nikkei Stock Average closed 0.2% lower, while Australia's S&P/ASX 200 shed 1.5%. Hong Kong's benchmark Hang Seng Index fell 0.8% and its tech gauge declined 0.3%, weighed by chip stocks, which reversed course from the sharp gains seen earlier this week as investors booked profit as risk-off sentiment returned. The FTSE Bursa Malaysia KLCI fell 0.4%, while Singapore's FTSE Straits Times Index dropped 0.4%.

China's Shanghai Composite ended flat. South Korea's Kospi eked out a 0.1% gain after erasing earlier losses, managing to defy the downturn and set yet another record close.

--European blue-chip indexes extended losses at market open. Sectors exposed to falls in consumer confidence and higher energy inflation--including banks, industrials and travel and leisure stocks--all fell. The Europe-wide Stoxx 600 was down 0.75% after declining 1.1% in the last session. The German DAX fell 1% as industrials giant Rheinmetall lost 3.5%. Banks were the main drag on the French CAC 40, which fell 0.9%. The U.K.'s FTSE 100 was 0.6% lower as British Airways owner IAG slid 4.7%. Banks dragged on Spain's IBEX 35 and the Italian FTSE MIB, which fell 0.7% and 0.5%, respectively.

--The dollar rose against a basket of currencies. As well as escalation in the Middle East, a federal trade court ruled that President Trump didn't have the authority to impose new global tariffs after his previous levies were struck down by the Supreme Court in February. The DXY dollar index rose 0.1% to 98.162.

Sterling rose even as early results for U.K. local elections show the ruling Labour Party suffering significant losses.

--U.S. Treasury yields declined in Asian trade with market focus on the release of April payrolls data. "A modest gain in payrolls alongside an unemployment rate holding at 4.3% would reinforce the picture of a labor market that's cooling but not cracking--a low-hire, low-fire equilibrium," said First Citizens Bank's Phil Neuhart. Analysts in The Wall Street Journal's poll expect job addition of 55,000. The two-year Treasury yield fell 0.9 basis points to 3.909%, while the 10-year yield was down 0.6bps at 4.387%.

--Eurozone government bond yields opened higher, reacting to a renewed increase in oil prices. The eurozone is a net energy importer and therefore vulnerable to higher energy prices. The 10-year German Bund yield was up 2.2 basis points at 3.009%, while the 10-year Italian BTP yield rose 3.6 basis points to 3.747%. In the U.K., Ten-year gilt yields rose 2.8 basis points to last trade at 4.948%.

--Bitcoin fell back below $80,000, dropping 0.5% to $79,497.

--Gold prices traded above $4,700 a troy ounce, supported by central-bank buying. "Gold's resilience during a period of exceptional equity market strength points to continued central bank demand as well as lingering investor unease over inflation, economic growth and mounting fiscal debt concerns," analysts at Saxo Bank said. In early European trading, futures in New York rose 0.1% to $4,715.20 a troy ounce and are on track for a weekly gain of 1.5%.

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(END) Dow Jones Newswires

05-08-26 0414ET