Asian stock markets saw major declines on Monday as gold futures dropped 8% and crude oil prices continued to climb amid heightened uncertainty in the Middle East.
As the effective closure of the Strait of Hormuz continues to choke global supply, benchmark US crude rose above $100 a barrel on Monday morning in Europe.
Brent crude, the international standard, went up to more than $113 a barrel. The price of Brent crude has zigzagged lately from about $70 per barrel before the war began to as high as $119.50.
European stock indexes opened with losses, with the FTSE in London losing 1.5%, the CAC-40 in Paris being down by 1.6%, and the DAX in Frankfurt dropping by 2% at the opening.
Earlier on Monday, the International Energy Agency warned that the global economy faces a “major, major threat” because of the Iran war and that at least 40 energy assets across nine countries were damaged.
Meanwhile, the de-escalation of the conflict is nowhere near in sight.
Trump warned over the weekend that the US would “obliterate” Iran’s power plants if it does not fully open the Strait of Hormuz within 48 hours, prompting Tehran to say it would respond to any such strike with attacks on US and Israeli energy and infrastructure assets in the region.
“Trump’s ultimatum and Iran’s retaliatory warnings point to a widening conflict that keeps energy disruption and market volatility elevated, with no clear off-ramp in sight,” said Ng Jing Wen, analyst at Mizuho Bank in Singapore.
In Europe, the benchmark natural gas futures were trading above €60 per MWh at the market open.
This follows last week’s gains as escalating threats to Middle Eastern energy facilities heightened fears of deeper supply disruptions.
In Asia, stock markets were also significantly impacted by the uncertainty around the Middle East crisis, with Japan’s benchmark Nikkei 225 dropping 3.5%. In Taiwan, the Taiex shed 2.5%, South Korea’s Kospi dropped 6.5%, Hong Kong’s Hang Seng slipped 3.8% and the Shanghai Composite declined 3.6%.
Higher oil prices, which also shook stock markets on Friday, dashed hopes for a possible upcoming cut in interest rates by the Federal Reserve, analysts said. Before the war, traders were betting that the Fed would cut rates at least twice this year. Central banks in Europe, Japan and the United Kingdom also recently held their interest rates steady.
The S&P 500 fell 1.5% Friday to close its fourth straight losing week, its longest such streak in a year.
The Dow Jones Industrial Average dropped 443 points, or 1%, and the Nasdaq Composite tumbled 2%.
On Wall Street, roughly three out of every four stocks in the S&P 500 fell on Friday.
Stocks of smaller companies, which can feel the pinch of higher interest rates more than their bigger rivals, led the way lower. The Russell 2000 index of smaller stocks fell a market-leading 2.3%.
In the bond market, the yield on the 10-year Treasury finished last week with a jump to 4.38% Friday from 4.25% late Thursday and from just 3.97% before the war started.
The two-year Treasury yield, which more closely tracks expectations for what the Fed might do, rose to 3.88% from 3.79%.
In currency trading, the US dollar rose to 159.53 Japanese yen from 159.22 yen. The euro cost $1.1526, down from $1.1571.