Oil Higher on Hormuz Escalation, Weighing on Sentiment — Update
By Joe StonorRising oil prices weighed on market sentiment in afternoon European trade after Iranian forces fired ballistic missiles on two U.S. Navy warships, representing a fresh escalation in the six-month conflict.Brent crude oil rose 1.3% to $97.50 a barrel as both the U.S. and Iran ramped up efforts to assert control over the crucial Strait of Hormuz. The U.S. military said it struck three Iranian oil tankers in response to the Islamic Revolutionary Guard Corps attack on American ships.The dollar fell around 1% against the yen, with the Japanese currency hitting a more than six-month high against the greenback. Increasing market confidence that the Bank of Japan will raise rates has added to the yen's strength. Monday's gains follow a recovery spurred by market expectations that Japanese authorities would intervene to support the currency.In the U.S., stock futures for the Dow Jones Industrial Average dropped 0.5%, while S&P 500 futures fell 0.4%. Nasdaq futures were 0.3% lower.A rally in U.S. tech stocks Friday was picked up in Asia on Monday, with Korea's Kospi jumping 4.6%. Memory chip makers SK Hynix and Samsung Electronics shares surged 8.3% and 5.7%, respectively. In Japan, the Nikkei 225 rose 2.1% as SoftBank Group shares jumped 11%. Hong Kong's Hang Seng index slipped 0.9%.European AI-related stocks also gained, with ASML rising 1.5%. Weakness in healthcare and consumer-facing stocks dragged on the continent's indexes, however, with the Stoxx 600 trading 0.1% lower.Higher oil prices helped to push sovereign bond yields higher across the eurozone. Yields on 10-year German Bunds rose by 2.5 basis points to 3.379% after the far-right Alternative for Germany won a regional election. In the U.K., 10-year gilts pared gains slightly to rise by 2.2 basis points to 5.082% after finance minister John Healey acknowledged the impact of high government borrowing costs in a speech on economic growth.Treasurys didn't trade as U.S. markets break for Labor Day.Gold futures slipped to $4,439.50 a troy ounce in New York, while Bitcoin held just below $80,000 in low volume trade.For the week ahead, U.S. inflation data will be the main event after hotter-than-expected jobs data Friday raised expectations of a Federal Reserve rate hike on Sept. 16. The market is split on whether the Fed will hike, with a quarter-point raise given 56% probability, according to LSEG. The European Central Bank is expected to raise rates Thursday.Write to Joe Stonor at [email protected]