Oil Climbs, Asian Equities Fall as U.S.-Iran Peace Talks Collapse -- Update

By Ronnie Harui and Sherry Qin

Oil rose back above $100 a barrel and Asian equities fell, as the collapse of the U.S.-Iran peace talks poured cold water on hopes of an end to the fighting that has roiled markets, threatening to slow global growth and fuel inflation.

Markets reversed the tentative gains made last week after a two-week cease-fire was announced, and President's Trump ramped-up rhetoric on the Strait of Hormuz--through which one-fifth of the world's oil and many key commodities are transported--will fuel fears about supply shocks.

In a Truth Social post, President Trump said the meeting with Iran lasted close to 20 hours and most points were agreed to, "but the only point that really mattered, NUCLEAR, was not."

Since Iran is unwilling to give up its nuclear ambitions, the U.S. will block all ships trying to enter or leave the Strait of Hormuz, he added. U.S. Central Command forces said they will implement a blockade of all maritime traffic entering and exiting Iranian ports at 10 a.m. ET on Monday.

The war has brought traffic through the waterway to a halt, but Iran had allowed a few vessels to pass under a new regime of routes, permissions and fees known in the industry as the "Tehran Tollbooth."

The U.S. blockade will now put these vessels and countries at odds on whether to comply or face confrontation with the enforcing navy, Commerzbank Research analysts said in a research report.

Trump said other countries will be involved in the blockade, instructing the U.S. Navy to interdict every vessel in international waters that has paid a toll to Iran.

"No one who pays an illegal toll will have safe passage on the high seas," he said.

Economies are already feeling the hit from the choked-off flows of energy, fertilizers and other commodities from the Middle East. The longer the disruptions last, the higher the economic toll will be, analysts warn.

Financial markets are likely to remain defensive as the latest developments put an already fragile cease-fire at risk, said UOB's global economics and markets research team.

Oil surged back above $100 barrel, with front-month West Texas Intermediate futures climbing 8.5% to $104.73 a barrel and front-month Brent up 7.2% at $102.04 a barrel, ICE data showed.

Oil markets have decisively re-entered geopolitical mode, Phillip Nova's Priyanka Sachdeva said, adding that the every barrel of oil blocked at the strait carries an inflation price tag for the global economy.

Spot gold pulled back from its recovery last week and was last down 0.55% at $4,720.69 a troy ounce. Spot silver fell 2.1% to $74.30 a troy ounce.

OCBC reckons that focus remains on whether the cease-fire holds as that would have implication on oil prices, inflation and influence market expectations on rates, which in turn can affect the appeal of gold prices.

Stock markets across Asia fell, with Japan's Nikkei Stock Average losing 1.0%, South Korea's Kospi dropping 1.2% and Australia's S&P/ASX 200 benchmark index shedding 0.5%. U.S. stock-market futures were lower, with eMini Nasdaq 100 futures falling 0.8%, eMini S&P 500 futures declining 0.8% and eMini Dow futures down 0.7%.

Shipping and airline stocks were major decliners in Asia. Cathay Pacific Airways fell 2.3% and China Eastern Airlines declined 3.3%. Cosco Shipping Energy Transportation shed 4.3% in Shanghai and Hanwha Ocean was down 2.2% in Seoul.

The greenback gained broadly against Asian currencies as demand for safe-haven assets rebounded. The dollar was 0.2% higher at 159.69 yen and 1.0% higher at 32.27 Thai baht.

Write to Ronnie Harui at [e-mail] and Sherry Qin at [e-mail]

(END) Dow Jones Newswires

04-12-26 2306ET