Stocks Fall With Bonds as Iran Concerns Boost Oil: Markets Wrap

Lindsay Rosner, Head of Multi-Sector Fixed Income Investing at Goldman Sachs Asset Management, discussed the accelerated pace of market movements compared to the pre-COVID era, investors no longer have the luxury of time to react to major market events or geopolitical developments, as news cycles and market responses are now highly compressed and volatile. Bloomberg

Article content

(Bloomberg) — Stocks and bonds dropped as stalled US-Iran talks and the continued closure of the Strait of Hormuz drove oil prices higher, souring risk sentiment after a record rally on Wall Street.

Article content

MSCI’s Asia Pacific equity gauge fell 1.1%, with decliners outnumbering advancers almost four to one, as higher oil prices damp the outlook for economic growth. Futures contracts for the S&P 500 Index and the tech-heavy Nasdaq 100 both dropped 0.6%, after the underlying gauges closed at a record high on Wednesday on robust corporate earnings and the extension of the US-Iran ceasefire.

Article content

Article content

Article content

Brent crude climbed 1.5% to $103.40 a barrel, putting it on track for a fourth straight day of gains, due to a lack of progress in US-Iran talks. The benchmark has surged 70% this year, with most of the advance coming after the Middle East conflict started in late February. Bonds fell as higher oil prices stoked inflation concerns.

Article content

Article content

While President Donald Trump said a truce with Iran would remain in place indefinitely, investors remain wary of the lack of progress in talks to resolve the nearly two-month conflict. The longer the war drags on and the Strait of Hormuz stays shut, keeping oil prices elevated, the greater the risk of significant economic fallout for economies worldwide.

Article content

“Markets have taken a glass-half-full view during this conflict, hoping for a quick resolution and normalization of energy flows through the Strait,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia in Sydney. “I still think markets will soon come to realization the path to a long lasting agreement is still some way away and energy prices will likely increase further before easing.”

Article content

Article content

Tensions remain high as the US and Iran failed to meet for a fresh round of peace talks, with both sides blocking the waterway to gain leverage during an extended ceasefire. Tehran says it has no plans to take part in negotiations imminently.

Article content

The US maintained a naval blockade on ships going to and from Iran’s ports to pile pressure on the Islamic Republic, in a move Iranian Foreign Minister Abbas Araghchi called a violation of the ceasefire.

Article content

What Bloomberg Strategists Say…

Article content

“There is a high motivation for taking chips off the table as the MSCI World index is up more than 8% this month and the calendar is full of major central bank meetings next week. Traders will also be wary of sudden talk about a super-cycle of demand in AI. Typically it is just when there is broad recognition of a theme, it is time to take some profits.”

Article content

— Mark Cranfield, MLIV. To read the full analysis, click here.

Article content

Treasuries headed for a fourth day of losses, with the 10-year yield rising two basis points to 4.32%, while the dollar gained against most of its major peers.

Article content

In other corners of the market, gold slipped 0.8% to about $4,700 an ounce, while silver declined 2% to about $76.15 an ounce. Bitcoin was a touch weaker at about $77,800.