LONDON: Global oil prices jumped and stock markets fell on Tuesday as investors braced for a looming deadline set by US President Donald Trump for Iran to agree to a peace deal.
Crude prices rose sharply as markets reacted to supply risks in the Middle East.
The US benchmark, West Texas Intermediate (WTI) for May delivery, climbed more than two percent to trade near $115 a barrel.
Brent North Sea crude for June delivery gained around half a percent to above $110 a barrel.
Prices initially surged further following reports of US-Israeli strikes on Iran’s Kharg Island oil export terminal, a critical hub for global supply.
However, gains eased after reports suggested the targets were military rather than energy infrastructure.
Around one-fifth of global oil supply typically passes through the Strait of Hormuz, which Iran has effectively blocked since the start of the conflict on February 28.
Stock markets fall
Equity markets weakened across major regions.
The three main US stock indices opened lower, while European markets in London, Paris and Frankfurt were in negative territory during mid-afternoon trading.
On Wall Street, the Dow Jones Industrial Average fell about 0.5 percent, the S&P 500 dropped 0.7 percent, and the Nasdaq Composite declined 1.1 percent in early trade.
Trading remained volatile, with the Dow swinging between gains and losses during the session.
Analysts said uncertainty surrounding US policy and the trajectory of the conflict was weighing heavily on investor sentiment.
“The conflict in the Middle East is one long deadline after another,” said Kathleen Brooks, research director at XTB.
“Ultimately, no one knows what the president will do next, and this is causing tensions to remain high in financial markets.”
Patrick J. O’Hare of Briefing.com described the session as “a hand-wringing day”, adding that markets were balancing hope for de-escalation with fears of further escalation.
Trump deadline raises stakes
Trump has warned Tehran that unless it allows free passage through the Strait of Hormuz by midnight GMT, the United States will unleash what he described as the “complete demolition” of Iran’s critical infrastructure.
He escalated his rhetoric further on Tuesday, warning that “a whole civilisation will die” if Iran does not meet US demands, although he said he hoped such an outcome could be avoided.
Economic fallout spreads globally
The disruption to Middle East energy supplies has raised fears of renewed inflationary pressures worldwide.
Governments have begun rolling out support measures to cushion the economic impact.
In Asia, the Philippines reported inflation rising to 4.1 percent in March, its highest level in nearly two years and above forecasts.
Recent US data also indicated that growth in the services sector slowed, as businesses grappled with rising energy costs and the risk of supply chain disruptions.
Companies with high fuel exposure were among the worst performers.
Norwegian Cruise Line fell 4.3 percent, while United Airlines dropped 3.7 percent.
Discount retailers also declined, with Dollar Tree down 4.8 percent and Dollar General losing 1.8 percent.
Cryptocurrency-linked stocks also weakened as bitcoin prices fell. Coinbase Global dropped 4.6 percent, while Strategy declined 4.1 percent.
Shares in Samsung Electronics rose about one percent after the company forecast a 755 percent surge in first-quarter profit to a record $38 billion, driven by strong demand for artificial intelligence chips.
Meanwhile, Universal Music Group shares jumped 10.8 percent in Amsterdam after Pershing Square Capital Management offered to acquire the company in a deal valued at around $64 billion.
Currency and bond markets
Currency markets were relatively stable. The US dollar was little changed against major peers, while the euro and pound edged higher.
In bond markets, US Treasury yields rose slightly, with the 10-year yield climbing to 4.36 percent from 4.34 percent on Monday.
Elevated yields have pushed up borrowing costs for households and businesses, adding to economic headwinds.
Key market levels
- WTI crude: up 2.7 percent at $115.44 per barrel
- Brent crude: up 0.5 percent at $110.30 per barrel
- Dow Jones: down 0.6 percent at 46,391.07
- S&P 500: down 0.5 percent at 6,577.13
- Nasdaq Composite: down 0.6 percent at 21,867.83
- FTSE 100: down 0.4 percent at 10,384.14
- CAC 40: down 0.1 percent at 7,961.82
- DAX: down 0.4 percent at 23,067.75
