Markets rally as oil eases after Trump says strikes on Iran may be brief

Asian and US stocks climbed and bond yields dipped after US President Donald Trump suggested the latest strikes on Iran could be short-lived, easing fears of a prolonged energy and inflation shock.

Short-lived strikes ease market worries

Trading floors rallied after Mr Trump told reporters about the US attacks on Islamic Republic targets in the Strait of Hormuz:

“I don’t think too long.”

His comment helped pare back some of the worst-case market fears that the flare-up could push oil sharply higher and sustain inflationary pressure.

Oil, yields and stocks move

Crude had rallied earlier in the weekat one point up as much as 10 percentafter the strikes and tit-for-tat exchanges around the crucial waterway, which handles a large share of global oil and gas shipments. Following Mr Trump’s remark, the two main contracts, Brent and West Texas Intermediate, pared gains and edged lower.

Yields on 10-year US Treasuries and Japanese government bonds of the same maturity both dipped, a development that supported gains across major US indexes and lifted Asian markets. Tokyo, Seoul, Hong Kong, Shanghai, Sydney, Singapore, Taipei and Jakarta were all up.

Shipping, data and policy in focus

CNN cited US officials as saying the military escorted 40 commercial ships loaded with 18 million barrels of crude through the strait, a wartime high. News of fresh US attacks, however, tempered selling in oil markets.

Weak US economic data also gave markets a lift: August private jobs creation came in below expectations and declined from the previous month, and job openings missed forecasts, easing pressure on the Federal Reserve to raise borrowing costs. Attention is on upcoming releases, including non-farm payrolls and next week’s consumer price index, ahead of the Fed’s September 16 rate decision.

Market commentary

Stephen Innes at Quintex Intel wrote:

“Treasury yields eased, and stocks could finally breathe,”

adding that the soft readings “finally offered a little relief… (and) gave the bond market a reason to stop climbing the stairs for a moment.” He also warned that while Mr Trump’s comments had “taken some heat out of the worst-case inflation fears, the geopolitical pot is still simmering.”

Currency and regional notes

Investors monitored Tokyo after a spike in the Japanese yen, which strengthened to 158.22 per dollar Wednesday after earlier trading above 160. Observers said it looked like authorities had stepped in to counter volatility. A top Bank of Japan board member suggested the central bank could hike rates more than the expected 25 basis points at its next meeting.

Key market levels

• Tokyo – Nikkei 225: up 0.2 percent at 64,455.83
• Hong Kong – Hang Seng Index: up 0.7 percent at 25,477.08
• Shanghai – Composite: up 0.5 percent at 3,960.85
• West Texas Intermediate: down 0.1 percent at $90.91 per barrel
• Brent North Sea Crude: down 0.2 percent at $95.44 per barrel
• Dollar/yen: down at 158.40 from 158.89
• Euro/dollar: up at $1.1586 from $1.1584
• Pound/dollar: down at $1.3481 from $1.3484
• New York – Dow: up 0.6 percent at 53,061.95 (close)
• London – FTSE 100: down 0.3 percent at 10,756.45 (close)

Reporting AFP.