Asia markets brace for Trump’s promised assault on Iran
Oil prices rose, bonds fell and stocks were mixed at the start of trading in Asia on Monday as U.S. President Donald Trump vowed “hell” if Tehran did not meet a deadline to reopen the Strait of Hormuz.
Trump’s threats to destroy civilian infrastructure, including power plants and bridges, if the vital waterway is not opened by Tuesday have left traders on edge against Iran’s counter-attacks on targets in the Gulf states.
S&P 500 e-mini futures fell 0.2 percent on Monday as liquidity was weak as many countries in the region went on holiday, while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent.
While the Nikkei 225 rose 1.2 percent, South Korea’s Kospi index rose 2.0 percent.
Brent crude futures rose 1.4 per cent to US$110.58 ($A160.17) per barrel after OPEC+ members agreed on Sunday to increase oil production quotas for May by 206,000 barrels per day.
However, the increase will remain only on paper for several major producing countries behind the Strait of Hormuz, which have suffered damage to oil production facilities and transportation infrastructure since the start of the war.
“This week will continue to be dominated by developments in the Middle East, but a dense slate of data will vie for attention, including the FOMC March minutes, February personal income and March CPI,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, referring to the Federal Open Market Committee, which sets U.S. monetary policy.
“Trump warned Iran that if the Strait is not opened immediately, Monday will be Destruction Day, when the United States will bomb Iranian power plants,” he wrote in an investigative report.
On Friday, the S&P 500 closed up 0.1 percent after the U.S. jobs report showed job growth picked up more than expected in March; Nonfarm payrolls increased by 178,000, representing the largest increase in more than a year. The unemployment rate dropped from 4.4 percent to 4.3 percent as people left the workforce.
The data complicates the picture for the Federal Reserve, which will decide on monetary policy at a two-day meeting ending April 29.
However, swap pricing according to CME Group’s Fedwatch tool shows that the market does not expect any move from the US central bank until September 2027.
The US dollar index, which measures the dollar’s strength against a basket of six currencies, remained stable at 100.23. The yield on the US 10-year Treasury bond increased by 4.7 basis points to 4.3584 percent.
In Japan, the yield on Japanese government bonds hit a new record for the 21st century amid rising inflation concerns. The yield on banknotes increased by 2.0 basis points to 2.4 percent, reaching its highest level since February 1999. The US dollar remained stable against the yen at 159.635 yen.
Gold fell 0.8 percent to $4,638.54 (A6,718.63). In cryptocurrencies, Bitcoin was up 1.9 per cent at US$68,915.85 (A$A99,820.24), while Ethereum was up 2.4 per cent at US$2,117.61 (A$A3,067.22).
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