Oil prices surged and bond futures declined on Wednesday after the US launched military strikes against Iran and reinstated trade sanctions following attacks on tankers in the Strait of Hormuz. US crude futures were up 2.7% to $72.40 a barrel, while Brent crude futures rose 2% to $75.60 a barrel. The re-imposition of sanctions on Iranian oil, which had previously allowed Iran to sell oil on the global market, was cited by Iran's foreign ministry as a breach of a prior peace framework. Analysts like Jason Wong from BNZ noted that while the market disliked the attacks, there wasn't full-blown panic, though low global reserves, with US Strategic Petroleum Reserve hitting its lowest since 1983, made markets vulnerable to future supply shocks.
Bond markets reacted negatively, with 10-year US Treasury futures sliding seven ticks, and yields climbing about three basis points to a one-month high of 4.565%. This reflected traders pricing in increased inflation and interest rate risks due to the geopolitical tensions. David Chao, Asia-Pacific global market strategist at Invesco, highlighted that the peace deal was still very much a process, reminding investors that geopolitical risk premiums were not yet settled.
Stock markets showed mixed reactions, with momentum ebbing from the record-breaking AI rally. S&P 500 futures were down around 0.1%, and Nikkei futures pointed to a fall in Japanese stocks. South Korea's chip-heavy market, despite blockbuster earnings from Samsung Electronics, saw a 1.5% decline. Samsung's shares themselves fell 7% after announcing a 19-fold increase in profit, signaling investor wariness about extending a rally that has lifted the market 82% this year. The tech-heavy Nasdaq Composite also fell 1.16%, with the Philadelphia semiconductor benchmark down 4.6%.
In currency markets, the dollar firmed, pushing the euro back to just above $1.14 and climbing past 162 yen, raising concerns about potential intervention from Japanese authorities. The New Zealand dollar, however, blipped about 0.5% higher to $0.57 after the Reserve Bank of New Zealand raised interest rates, an action largely anticipated by traders. These market movements underscore the dual pressures of geopolitical instability and re-evaluation of high-growth tech valuations.
