Oil jumps on Hormuz tensions, stocks retreat

AFP | London

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US and European stocks reversed yesterday as oil prices surged over fears hostilities could resume in the weeks-long Middle East war after Iran closed the Strait of Hormuz following its brief reopening.

Investors were on edge approaching the end of the US-Iran ceasefire, with Washington saying it will send a delegation to Pakistan for a new round of talks “soon” and Iran saying it had yet to decide whether to attend.

“The market mood is very different at the start of the week compared to Friday,” said Kathleen Brooks, research director at trading group XTB.

Crude had plunged Friday after the Islamic republic said it would again allow ships to pass through the Strait of Hormuz, through which a fifth of global oil and liquefied natural gas usually passes.

But world oil prices bounced yesterday as Iran closed the waterway and said the US blockade and seizure of an Iranian cargo ship breached the two-week ceasefire.

“Renewed attacks on commercial vessels in the Strait of Hormuz increased fears of supply disruptions and raised the risk of a broader escalation in hostilities between the US and Iran,” said Trade Nation analyst David Morrison.

“Uncertainty also remains over whether negotiations in Islamabad will proceed after Iran said it would not attend talks while the blockade remains in place,” he added.

Wall Street’s main stock indices dipped, with the S&P 500 and Nasdaq Composite falling from record closes.

The S&P 500 shed 0.3%, the Nasdaq Composite 0.5% and the blue-chip Dow less than 0.1%.

The losses were sharper in Europe. Frankfurt dropped 1.2%, Paris shed 1.1% and London gave up 0.6%.

That came after gains for Tokyo, Hong Kong and Shanghai.

“Asian shares rebounded as they were in catch-up mode, having missed the rally seen in the US and Europe on Friday,” said AJ Bell investment director Russ Mould. “European indices presented a truer picture of the market mood, with investor wariness and weariness amid the continuing tensions in the Middle East,” he added before trading began in New York.

The blockade of Iranian ports has been a significant sticking point in negotiations between the two countries, with both accusing the other of ceasefire violations.

There has so far been only one negotiating session, held in Islamabad on April 11 that ended inconclusively, although groundwork for fresh talks continued afterwards.

“We’re offering a very fair and reasonable DEAL, and I hope they take it,” Trump said in a social media post Sunday, while also renewing his threats against Iran’s infrastructure if a deal is not made.

Iran’s Revolutionary Guards warned that any attempt to pass through the strait without permission “will be considered cooperation with the enemy, and the offending vessel will be targeted”.

Chris Weston at Pepperstone said traders were assessing “whether the ceasefire can be salvaged through this week’s diplomatic talks, with recalibration on the probability of military escalation”.

“Without a comprehensive agreement on Iran’s nuclear programme, the ceasefire remained fragile.”