Oil climbs, stocks drop on fresh US-Iran strikes

AFP | London

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Oil prices bounced higher and global stock markets fell yesterday after the United States and Iran exchanged new strikes despite their purported ceasefire, rekindling uncertainty about an end to the Middle East war.

The crude price jumps of around 2.5 percent partly erased Wednesday’s sharp declines on hopes of an imminent deal to stop a conflict that has all but halted shipping through the crucial Strait of Hormuz.

The latest strikes were the most serious since an April ceasefire, and came despite a series of headlines suggesting talks on a deal were progressing.

“A fresh exchange of strikes between the two countries is testing the fragile ceasefire and forcing a reassessment of the chances of a near-term agreement which can reopen the Strait of Hormuz and dial down the pressure the crisis is putting on the global economy,” said AJ Bell investment director Russ Mould.

Stock markets were down across the board with the Dow, the Nasdaq and the S&P 500 all in the red upon opening after the US Federal Reserve’s preferred inflation measure rose in April by its highest year-on-year rate since 2023.

The personal consumption expenditures (PCE) index jumped 3.8 percent from a year ago, the Commerce Department said, in line with expectations and up from 3.5 percent in March as the economic fallout of President Donald Trump’s Iran war continued to hit Americans.

The US also revised down its first-quarter GDP growth to 1.6 percent from 2.0 percent, as investment and consumer spending slowed.

The combination of persistent inflation and slowing growth lowers the chances of interest rate cuts by the Federal Reserve, despite President Donald Trump’s repeated calls for lower rates to support the world’s biggest economy.

“Even after stripping out energy prices, core PCE is sitting at a multi-year high. In response, the Fed has already taken on a more hawkish posturing in response to higher inflation,” said Bret Kenwell, US investment analyst at eToro.