Brent Surges to $123 – Moneyweb

Oil prices surged to their highest point in nearly four years as efforts to reopen the Strait of Hormuz stalled, impacting risk sentiment even though there was a boost from major tech earnings.

Brent crude rose by as much as 4.3% to $123.11 per barrel, looking at a ninth consecutive day of gains, marking the longest winning streak since May 2022. The commodity has skyrocketed over 100% this year, largely spurred by the US-Israel strikes on Iran in late February. Oil continued on its upward trend Thursday following US President Donald Trump’s statement to Axios that he would not lift the naval blockade on Iranian ports until a nuclear agreement with Tehran is achieved.

This news impacted sentiment, leading to a pullback in stocks that were initially buoyed by tech earnings. Futures contracts for the Nasdaq 100 Index reduced their gains to just 0.3%, down from a high of 1%, after results from major firms like Alphabet Inc. and Amazon.com Inc. sparked optimism. The MSCI Asia Pacific shares index dropped by 1%.

Bonds also fell as rising oil prices and a hawkish stance from the Federal Reserve diminished demand for fixed-income investments. Treasury 10-year futures fell for a fourth consecutive day, while cash 10-year yields remained close to their highest levels since July. Yields on Japan’s 10-year notes reached their highest level since 1997.

Amid soaring oil prices driven by the Iran conflict, a divided Federal Reserve maintaining steady rates, and strong megacap tech earnings, traders navigate a wave of fluctuating headlines. With oil reaching four-year highs and bond yields rising, this environment challenges a global equity rally that has reversed war-related losses and propelled US markets to new heights, thanks to robust tech earnings.

“As the MAG7 profitability results emerge, their business success starkly contrasts the growing US debt and yield narrative,” said Martin Whetton, head of financial markets strategy at Westpac Banking Corp.

Thursday brings more for traders to analyze, with the European Central Bank and the Bank of England poised to announce their policy decisions, followed by US economic data.

Apple is set to be the highlight earnings event on Thursday, following a frenetic Wednesday that provided insights into how some of the largest tech companies are performing in the realm of artificial intelligence. The takeaway is that Alphabet’s Google is reaping clear benefits from its AI investments, while Meta lags behind.

Alphabet’s stock rose 7% in post-market trading, while Meta Platforms Inc. fell by 7%. Amazon.com Inc. shares climbed 2.7%, and Microsoft Corp. increased by 0.3%. In addition, Anthropic PBC is considering a new funding round that could value the AI developer at over $900 billion, potentially overtaking its longstanding competitor OpenAI as the world’s most valuable AI startup.

In Asia, the AI-driven rally is hiding signs of tension, with gains in tech stocks overshadowing the impact of the US-Iran conflict on the wider market.

The yen remained steady on Thursday after falling past 160 per dollar to its weakest level this year, raising concerns that Japanese officials might intervene to stabilize the currency.

Gold increased by 0.5% to $4,570 an ounce, while Bitcoin rose to around $75,750. Japanese stock indices dropped more than 1% as they reopened after a holiday. Nonetheless, South Korea’s Kospi Index is on track for its best month since 1998, and Taiwan’s Taiex has seen its best performance since 2001.

What Bloomberg Strategists Say…

“Asian equities are caught between two strong opposing forces: a robust global capex cycle and a deteriorating inflationary landscape that threatens wider corporate margins.” – David Savage, Macro Squawk.

A market-wide shift towards expecting a prolonged conflict has intensified attention on US supplies, which have become increasingly critical to compensate for disruptions in Middle Eastern flows. Data from the US government released Wednesday indicated that domestic oil stockpiles are declining while American exports are reaching record highs.

“The primary concern is the rise in oil,” stated Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust. “There’s genuine worry about inflation. It seems the US is resistant to Iran’s latest deal proposal, leaving the situation surrounding the Strait of Hormuz uncertain.”

The Federal Reserve maintained its rates on Wednesday but indicated a growing divide over future policy outlooks. Traders have largely dismissed expectations for a rate cut this year and have begun factoring in the possibility of a hike by 2027.

Jerome Powell’s press conference marked his last as head of the central bank after the Justice Department concluded a contentious criminal investigation into the Fed, paving the way for the Senate’s confirmation of Kevin Warsh as the next chair. Powell stated he would continue his role at the central bank as a governor.

The latest meeting highlighted a widening split among members. Cleveland Fed President Beth Hammack and Minneapolis’ Neel Kashkari, along with Dallas’ Lorie Logan, supported sustaining the federal funds rate’s target range but opposed incorporating an easing bias in the statement at this time. Governor Stephen Miran dissented in favor of a cut.

“The three dissenters regarding the statement’s tone indicate a slightly more hawkish stance, as certain officials prepare for the possibility that inflation remains elevated for an extended period,” said Angelo Kourkafas at Edward Jones. “We anticipate the Fed will maintain its current stance in the upcoming months.”

Some of the significant movements in the markets:

Stocks

• S&P 500 futures increased by 0.1% as of 12:48 p.m. Tokyo time
• Nikkei 225 futures (OSE) fell by 1.2%
• Japan’s Topix dropped by 1.5%
• Australia’s S&P/ASX 200 decreased by 0.2%
• Hong Kong’s Hang Seng fell by 1.3%
• The Shanghai Composite remained mostly unchanged
• Euro Stoxx 50 futures decreased by 0.5%

Currencies

• The Bloomberg Dollar Spot Index remained stable
• The euro held steady at $1.1666
• The Japanese yen was unchanged at 160.40 per dollar
• The offshore yuan was steady at 6.8422 per dollar

Cryptocurrencies

• Bitcoin rose 0.3% to $75,887.13
• Ether increased by 0.6% to $2,253.49

Bonds

• The yield on 10-year Treasuries remained stable at 4.42%
• Japan’s 10-year yield climbed five basis points to 2.515%
• Australia’s 10-year yield rose eight basis points to 5.07%

Commodities

• West Texas Intermediate crude increased by 2.3% to $109.32 per barrel
• Spot gold rose by 0.3% to $4,560.47 an ounce
• This report was generated with the assistance of Bloomberg Automation.

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