Brent oil heads for record month, stocks in limbo

Brent crude rose 3 percent and is on track for a record monthly rise, while global stocks remain in limbo as investors fear the Gulf conflict will lead to a spike in inflation and risk recession for much of the world.

Shares across Asia fell on Monday; Japan’s Nikkei index fell 2.8 percent in a region more dependent on Gulf oil exports.

European stocks were stronger in early trading and Wall Street futures were pointing higher, although weaker given the recent sell-off.

Investors were evaluating contradictory developments.

The Financial Times quoted President Donald Trump late Sunday as saying the United States could seize Kharg Island in the Persian Gulf, from which Iran exports most of its oil, but also that a ceasefire could come quickly.

Pakistan said it was preparing to host “meaningful talks” to end the conflict over Iran in the coming days, although Tehran accused Washington of preparing a ground offensive as the US military built up forces in the region.

“Oil is a lightning rod right now,” said Eren Osman, managing director of asset management at Arbuthnot Latham, adding that reopening the Strait of Hormuz was key to calming world markets.

“The big challenge for us as investors today is that you have one of the widest range of potential outcomes,” he said, adding that he did not expect a prolonged conflict because he believed Trump had a “pain threshold” for market losses.

Madison Cartwright, senior geoeconomics analyst at the Commonwealth Bank of Australia, said Iran’s control of the Strait of Hormuz still gave Iran little incentive to make concessions, and the bank expected the war to last at least until June.

Restrictions in the Bosphorus caused an increase in oil, gas, fertilizer, plastic and aluminum prices, as well as aviation and ship fuel prices.

Prices of food, pharmaceuticals and petrochemical products are expected to increase.

This is especially bad news for Asia; as much of the region is heavily dependent on energy from the Middle East.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.8 percent.

European stocks were last up 0.3 percent, while S&P 500 and Nasdaq futures pointed to gains of about 0.5 percent.

“The longer the strait remains closed, the sharper the reduction in buffer supply will be, which could lead to dramatic increases in crude oil, natural gas and other commodity prices,” warned Bruce Kasman, head of global economics at JPMorgan.

“A scenario in which the strait remains closed for another month would be consistent with a rise in oil prices to US$150 ($A219) per barrel and restrictions on consumers of industrial energy supplies.”

Brent crude rose 3 per cent to US$116 ($A169) per barrel; It’s on track for a 60 percent increase in March; This increase will surpass the monthly jump experienced after Iraq invaded Kuwait in 1990.

US crude oil rose two percent to $101.67.

The threat of inflation has led investors to upgrade their outlook for interest rates almost everywhere.

US Federal Reserve Chairman Jerome Powell will have the chance to express his views at an event later Monday, and John Williams, the influential chairman of the New York Fed, will also speak.

This week, U.S. retail sales, manufacturing and employment data will provide an update on the direction of the economy.

The energy shock, combined with pressure on fiscal budgets due to higher borrowing costs and the need for more defense spending, has hit government bond markets.

Ten-year US Treasury bond yields were last at 4.3959 percent.

Increased volatility in markets has tended to benefit the US dollar, the world’s most liquid currency.

The United States is also a net energy exporter, giving it a relative advantage over much of Europe and Asia.

The dollar index was generally flat for the day and traded at 100.26, its highest level in 10 months.

Warnings from Japanese officials about possible intervention caused the dollar to fall by 0.3 percent to 159,775 yen.

It surpassed the 160 mark last week for the first time since July 2024, when Japan last took action to buy the yen.

The euro fell 0.1 percent to $1.1493; This is very close to the March low of $1.1409.

In commodity markets, gold rose ⁠0.9 percent to $4,534 an ounce, recently seeing insufficient support as a safe haven or hedge against inflation risks.