logo
Stocks slide, oil and gold jump after Israel strikes Iran

Stocks slide, oil and gold jump after Israel strikes Iran

CNA20 hours ago

TOKYO :Stocks dived in early Asian trade on Friday, led by a selloff in U.S. futures while safe havens like gold and the Swiss franc climbed along with crude oil prices on news that Israel had conducted a military strike on Iran.
U.S. S&P e-mini futures slumped 1.1 per cent as of 0018 GMT and Nasdaq futures skidded 1.3 per cent.
Japan's Nikkei lost 1 per cent and South Korea's KOSPI slipped 0.6 per cent. Most other regional markets had yet to open.
Brent crude jumped about 5 per cent to $72.76 per barrel. Gold added 0.8 per cent to $3,410 per ounce.
The Swiss franc gained about 0.5 per cent to 0.8060 per U.S. dollar, and fellow safe haven the yen appreciated 0.4 per cent to 142.89 per dollar.
Israel has begun carrying out strikes on Iran, two U.S. officials told Reuters on Thursday, adding there was no U.S. assistance or involvement in the operation.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Japan issues rare warnings on bond market in policy roadmap
Japan issues rare warnings on bond market in policy roadmap

CNA

time2 hours ago

  • CNA

Japan issues rare warnings on bond market in policy roadmap

TOKYO :Japan's government issued rare warnings on rising government bond yields and the changing structure of debt ownership in its economic policy roadmap as the central bank gradually trims its presence in the market. "We must continue efforts to further promote domestic ownership of government bonds to avoid spikes in long-term interest rates caused by supply-demand imbalances," the government said in this year's economic and fiscal policy guidelines approved on Friday. The explicit warning in the guidelines, which form the basis for budget planning, follows a recent bond market rout that briefly pushed yields on super-long Japanese government bonds (JGB) to record highs. The government debt market, particularly the longest-dated bonds, faces a triple whammy of the Bank of Japan's tapering of bond purchases, waning demand from life insurers previously driven by capital requirements and intensifying concerns over Japan's tattered finances. The BOJ, which owns 46 per cent of JGBs, has been slowing bond purchases as it exits a huge asset-buying scheme. The central bank is expected to make no big changes to the current bond taper plan at its policy meeting next week but consider slowing the pace of tapering from next fiscal year, signaling a preference to avoid big market disruptions, sources told Reuters. That raises the importance of domestic private-sector banks, previously the biggest JGB owners, though capital rules are likely to limit their exposure to rate risks. Foreign investors have boosted their presence in the market over the last decade, but their holding duration is typically less than those of life insurers, Koichi Sugisaki, macro strategist Morgan Stanley MUFG Securities, said. "A situation where these buy-and-sell investors are holding large interest rate risks is inherently unstable, if not outright dangerous," Sugisaki said. "It's like having 'magma' ready to erupt at any moment, should something trigger it." Banks owned 14.5 per cent of JGBs including treasury discount bills as of the end of last year, while insurance firms held 15.6 per cent. Foreign ownership stood at 11.9 per cent. Eager to boost purchases by stable domestic holders such as banks, the government is preparing to introduce new floating-rate bonds linked to short-term interest rates to mitigate risks from rising bond yields. It also plans to expand the scope of investors eligible to buy government bonds specifically designed for retail investors, allowing non-profit corporations and unlisted companies to buy such principal-guaranteed JGBs. Additionally, the government is considering buying back some super-long JGBs issued in the past at low interest rates to improve the supply-demand balance, on top of an expected plan to trim issuance of super-long bonds. Growing calls from lawmakers for more stimulus and tax breaks are adding to the bond market woes. Prime Minister Shigeru Ishiba has so far resisted proposals from some opposition parties for tax breaks aimed at helping households cope with persistent inflation. He instead instructed his Liberal Democratic Party on Friday to pledge cash handouts in its campaign for an upper house election in July, which would create less fiscal strain. The plan would not tap fresh deficit-financing bonds, he added. In the annual policy guidelines, the government effectively pushed back the self-imposed deadline for delivering a primary budget surplus from the previous target of fiscal 2025 to "as early as possible during fiscal years 2025 to 2026." ($1 = 143.9800 yen)

Analysis:OPEC+ would struggle to cover major Iranian oil supply disruption
Analysis:OPEC+ would struggle to cover major Iranian oil supply disruption

CNA

time2 hours ago

  • CNA

Analysis:OPEC+ would struggle to cover major Iranian oil supply disruption

LONDON :Oil market participants have switched to dreading a shortage in fuel from focusing on impending oversupply in just two days this week. After Israel attacked Iran and Tehran pledged to retaliate, oil prices jumped as much as 13 per cent to their highest since January as investors price in an increased probability of a major disruption in Middle East oil supplies. Part of the reason for the rapid spike is that spare capacity among OPEC and allies to pump more oil to offset any disruption is roughly equivalent to Iran's output, according to analysts and OPEC watchers. Saudi Arabia and the United Arab Emirates are the only OPEC+ members capable of quickly boosting output and could pump around 3.5 million barrels per day (bpd) more, analysts and industry sources said. Iran's production stands at around 3.3 million bpd, and it exports over 2 million bpd of oil and fuel. There has been no impact on output so far from Israel's attacks on Iran's oil and gas infrastructure, nor on exports from the region. But fears that Israel may destroy Iranian oil facilities to deprive it of its main source of revenue have driven oil prices higher. The Brent benchmark last traded up nearly 7 per cent at over $74 on Friday. An attack with a significant impact on Iranian output that required other producers to pump more to plug the gap would leave very little spare capacity to deal with other disruptions - which can happen due to war, natural disasters or accidents. And that with a caveat that Iran does not attack its neighbours in retaliation for Israeli strikes. Iran has in the past threatened to disrupt shipping through the Strait of Hormuz if it is attacked. The Strait is the exit route from the Middle East Gulf for around 20 per cent of the world's oil supply, including Saudi, UAE, Kuwaiti, Iraqi and Iranian exports. Iran has also previously stated that it would attack other oil suppliers that filled any gap in supplies left due to sanctions or attacks on Iran. "If Iran responds by disrupting oil flows through the Strait of Hormuz, targeting regional oil infrastructure, or striking U.S. military assets, the market reaction could be much more severe, potentially pushing prices up by $20 per barrel or more," said Jorge Leon, head of geopolitical analysis at Rystad and a former OPEC official. CHANGE IN CALCULUS The abrupt change in calculus for oil investors this week comes after months in which output increases from OPEC and its allies, a group known as OPEC+, have led to investor concern about future oversupply and a potential price crash. Saudi Arabia, the de facto leader of OPEC, has been the driving force behind an acceleration in the group's output increases, in part to punish allies that have pumped more oil than they were supposed to under OPEC+ agreements. The increases have already strained the capacity of some members to produce more, causing them to fall short of their new targets. Even after recent increases, the group still has output curbs in place of about 4.5 million bpd, which were agreed over the past five years to balance supply and demand. But some of that spare oil capacity - the difference between actual output and notional production potential that can be brought online quickly and sustained - exists only on paper. After years of production cuts and reduced oilfield investment following the COVID-19 pandemic, the oilfields and facilities may no longer be able to restart quickly, said analysts and OPEC watchers. Western sanctions on Iran, Russia and Venezuela have also led to decreases in oil investment in those countries. "Following the July hike, most OPEC members, excluding Saudi Arabia, appear to be producing at or near maximum capacity," J.P. Morgan said in a note. Outside of Saudi Arabia and the UAE, spare capacity was negligible, said a senior industry source who works with OPEC+ producers. "Saudi are the only ones with real barrels, the rest is paper," the source said. He asked not to be named due to the sensitivity of the matter. PAPER BARRELS Saudi oil output is set to rise to above 9.5 million bpd in July, leaving the kingdom with the ability to raise output by another 2.5 million bpd if it decides to. That capacity has been tested, however, only once in the last decade and only for one month in 2020 when Saudi Arabia and Russia fell out and pumped at will in a fight for market share. Saudi Arabia has also stopped investing in expanding its spare capacity beyond 12 million bpd as the kingdom diverted resources to other projects. Russia, the second largest producer inside OPEC+, claims it can pump above 12 million bpd. JP Morgan estimates, however, that Moscow can only ramp up output by 250,000 bpd to 9.5 million bpd over the next three months and will struggle to raise output further due to sanctions. The UAE says its maximum oil production capacity is 4.85 million bpd, and told OPEC that its production of crude alone in April stood at just over 2.9 million bpd, a figure largely endorsed by OPEC's secondary sources. The International Energy Agency, however, estimated the country's crude production at about 3.3 million bpd in April, and says the UAE has the capacity to raise that by a further 1 million bpd. BNP Paribas sees UAE output even higher at 3.5-4.0 million bpd. "I think spare capacity is significantly lower than what's often quoted," said BNP analyst Aldo Spanjer. The difference in ability to raise production has already created tensions inside OPEC+. Saudi Arabia favours unwinding cuts of about 800,000 bpd by the end of October, sources have told Reuters. At their last meeting, Russia along with Oman and Algeria expressed support for pausing a hike for July.

Stocks fall, oil prices jump after Israel attacks Iran
Stocks fall, oil prices jump after Israel attacks Iran

CNA

time3 hours ago

  • CNA

Stocks fall, oil prices jump after Israel attacks Iran

World stock markets fell on Friday, and oil prices surged, as Israel launched military strikes on Iran, sparking inflows into safe havens such as gold and the dollar. An escalation in the Middle East - a major oil-producing region - adds uncertainty to financial markets at a time of heightened pressure on the global economy from U.S. President Donald Trump's unpredictable trade policies. Early on Friday, Trump urged Iran to make a deal over its nuclear programme, saying there was still time for the country to prevent further conflict with Israel. Brent crude oil prices were last up 5.5 per cent at $73.22 per barrel, having jumped as much as 14 per cent during Asian trading hours. They were set for their biggest one-day jump since 2022, when energy costs spiked after Russia's invasion of Ukraine. U.S. oil futures rose 7.3 per cent to around $73. Gold, a safe haven in times of global uncertainty, rose 1.1 per cent to $3,422 per ounce, bringing it close to the record high of $3,500.05 from April. The rush to safety was matched by a dash out of risk assets. The Dow Jones Industrial Average fell 0.9 per cent, the S&P 500 dropped 0.34 per cent, and the Nasdaq Composite lost 0.4 per cent. European shares dropped almost 1 per cent, and in Asia, major bourses in Japan, South Korea, and Hong Kong fell over 1 per cent each. "The re-emergence of major conflict in the Middle East should raise geopolitical stress, including sharply higher oil prices," Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, said in an email. Samana added, though, that the conflict should represent a buying opportunity for long-term investors, including in U.S. large-cap stocks and commodities. Israel said it had struck Iran's nuclear facilities and missile factories and killed a swathe of military commanders in what could be a prolonged operation to prevent Tehran from building an atomic weapon. Trump suggested Iran had brought the attack on itself by resisting U.S. demands in talks to restrict its nuclear programme, and urged it to make a deal, "with the next already planned attacks being even more brutal." Washington said it had no part in the operation, however. The developments mean another major geopolitical risk has become a reality at a time when investors are wrestling with shifts in U.S. economic and trade policies. "The geopolitical escalation adds another layer of uncertainty to already fragile sentiment," said Charu Chanana, chief investment strategist at Saxo, adding that crude oil and safe-haven assets will continue rising if tensions continue to intensify. The Israeli shekel fell almost 1.4 per cent, and long-dated dollar bonds for Israel, Egypt and Pakistan slipped. TWO-WAY PULL FOR BONDS U.S. Treasuries initially benefited from the rush for safer assets, but as the day wore on, investors' focus turned to the inflationary impact of higher oil prices. U.S. 10-year Treasury yields were last up 6.7 basis points at 4.42 per cent, having touched a one-month low of 4.31 per cent. Bond yields move inversely to prices. "This is a flight-to-safety event. But markets are struggling a bit, and in the fixed income space you have an oil-price shock that is inflationary, and so you should see markets expecting an even more hawkish Fed," said James Rossiter, head of global macro strategy at TD Securities. "On the other hand, you have the flight to safety, which should push bond yields lower." Germany's 10-year bond yield touched its lowest level since early March at around 2.42 per cent, before also inching higher. Some traders were attracted to the dollar as a haven, with the dollar index up 0.35 per cent to 98.03, retracing most of Thursday's sizeable decline. The Swiss franc briefly touched its strongest level against the dollar since April 21, before trading 0.12 per cent lower at around 0.811 per dollar. Another safe haven, the Japanese yen, fell 0.34 per cent to 143.95 per dollar, giving up earlier gains of 0.3 per cent. The euro was down 0.2 per cent at $1.15, after rising on Thursday to the highest since October 2021.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store