Asia markets brace for Trump’s promised assault on Iran
· Michael West
Oil prices rose, bonds fell and stocks were mixed at the start of trading in Asia on Monday as US President Donald Trump vowed “hell” if Tehran does not meet his deadline to reopen the Strait of Hormuz.
Trump’s repeated threats to destroy civilian infrastructure including power plants and bridges if the vital waterway is not open by Tuesday have put traders on edge for reciprocal attacks by Iran on targets in the Gulf states.
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With liquidity thin as many countries around the region observed holidays on Monday, S&P 500 e-mini futures sank 0.2 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.5 per cent.
The Nikkei 225 rose 1.2 per cent, as South Korea’s Kospi advanced 2.0 per cent.
Brent crude futures opened higher, rising 1.4 per cent to $US110.58 ($A160.17) a barrel after members of the OPEC+ agreed on Sunday to raise its oil output quotas by 206,000 barrels per day for May.
However, the increase will exist only on paper for several major producing countries behind the Strait of Hormuz that have sustained damage to oil production facilities and transport infrastructure since the war started.
“This week will continue to be dominated by developments in the Middle East, though a heavy slate of data releases — including the FOMC March minutes, February personal income, and March CPI — will compete for attention,” said Yardeni Research president and chief investment strategist Ed Yardeni, referring to the Federal Open Market Committee which sets US monetary policy.
“Trump warned Iran that unless the Strait is opened immediately, Monday will be Obliteration Day, when the US will bomb Iran’s electric power plants,” he wrote in a research report.
On Friday, the S&P 500 closed up 0.1 per cent after the US jobs report showed employment growth rebounded more than expected in March, with a 178,000 increase in non-farm payrolls representing the biggest increase in more than a year. The unemployment rate fell to 4.3 per cent from 4.4 per cent, as people dropped out of the workforce.
The data complicates the picture for the Federal Reserve, which will next decide on monetary policy at a two-day meeting ending on April 29.
However, swaps pricing indicates the market is expecting no moves at all from the US central bank until September 2027, according to the CME Group’s Fedwatch tool.
The US dollar index, which measures the greenback’s strength against a basket of six currencies, was steady at 100.23. The yield on the US 10-year Treasury bond was up 4.7 basis points at 4.3584 per cent.
In Japan, the yield on the Japanese government bond set a fresh record for the 21st century on concerns about rising inflation. The yield on the notes was up 2.0 basis points at 2.4 per cent, the highest since February 1999. Against the yen, the US dollar was flat at 159.635 yen.
Gold slid 0.8 per cent to $US4,638.54 ($A6,718.63). In cryptocurrencies, bitcoin was up 1.9 per cent at $US68,915.85 ($A99,820.24), while ether gained 2.4 per cent to $US2,117.61 ($A3,067.22).