Oil Tops $100, Stocks Slump as Iran War Escalates: Markets Wrap

Crude oil climbed above $100 a barrel for the first time since 2022 and stocks retreated as escalating hostilities in the Middle East and worsening strain on oil shipping and infrastructure have investors bracing for fresh turbulence. The dollar advanced and Treasuries fell.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Crude oil climbed above $100 a barrel for the first time since 2022 and stocks retreated as escalating hostilities in the Middle East and worsening strain on oil shipping and infrastructure have investors bracing for fresh turbulence. The dollar advanced and Treasuries fell.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Brent rose 17% to about $108 a barrel, building on a 28% surge last week. Oil markets faced the prospect of further upheaval this week as the conflict involving Iran entered its second week, with major producers curbing output and traffic through the Strait of Hormuz — a crucial waterway for the movement of oil — effectively halted.As investors pared back on risk, the dollar, which has emerged as the haven of choice during this conflict, rose against almost all major currencies on Monday. Asian shares tumbled 1.8% at the open and futures contracts for the Nasdaq 100 Index fell as much as 2%.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Gold and silver dropped on inflation fears, raising the likelihood that the Federal Reserve will leave interest rates unchanged for longer, or even raise them. Treasuries extended their losses. Australian three-year bond yields surged to the highest since July 2011.Selling swept across regions and asset classes last week as the geopolitical flareup added fresh stress to markets that are already under pressure from AI disruptions and worries about the potential for cracks in credit markets. The escalating crisis has left investors caught between the risk of renewed inflation stemming from elevated oil prices and signs of cooling in the US labor market.“This is no longer just about Hormuz being effectively shut, it’s about supply disruption spreading deeper into the region,” said Dave Mazza, chief executive officer at Roundhill Financial. “That is the kind of shift that can push already-nervous investors to take more risk off the table.”On Sunday, Iran pressed attacks on neighbors, while Israel struck fuel depots in Tehran and threatened the Islamic Republic’s power grid.

President Donald Trump warned the US would consider targeting areas that weren’t previously aimed at. The attacks will continue “until they surrender or, more likely, completely collapse!” he said in a social media post.Meanwhile, Iran named the son of the late Ayatollah Ali Khamenei as its new supreme leader as Tehran kept up its attacks on several countries on the ninth day of the war in the Middle East. Elsewhere, the United Arab Emirates and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz rippled through energy markets and affected global supply.The effective closure of the narrow waterway linking the Persian Gulf to the open sea has clogged up exports from the world’s top oil-producing region.Another key area of focus was the strength of the dollar.

The Bloomberg Dollar Spot Index rose 0.5% on Monday.“The dollar is the biggest beneficiary in the current environment, given the USD’s safe haven status and the US’ position as a net energy exporter,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “How much higher the dollar will go from here depends on the depth and duration of the conflict, which remains highly uncertain.”Meanwhile on Friday in the US, nonfarm payrolls fell 92,000 last month, one of the largest declines since the pandemic. While some of the downside was expected, like a temporary dent from striking healthcare workers and a potential hit from bad weather, a wide array of industries cut jobs. The unemployment rate rose to 4.4%.Treasuries extended their losses on Monday with the yield on the benchmark 10-year rising to 4.18%.The Cboe Volatility Index, a gauge of implied price swings in the S&P 500 known as the VIX, surged toward 30 on Friday, pushing the spot price above its three-month futures in the largest inversion in almost a year.Spiking oil prices may precipitate a stock market correction rather than a bear market, but the latter is possible, said Ed Yardeni, president of Yardeni Research. If investors start expecting stagflation, a bear market is more likely.“The worst is yet to come in the stock market reaction,” said Michael O’Rourke, chief market strategist at JonesTrading. “I would expect more of a risk-off mood until we get some tangible positive news.”Some of the main moves in markets: StocksCurrenciesCryptocurrenciesBondsCommoditiesThis story was produced with the assistance of Bloomberg Automation.—With assistance from Ruth Carson and Momoka Yokoyama.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.