Today's Edition
SYDNEY (REUTERS)
Oil prices surged on Monday as the US moved to impose a blockade on Iranian shipping after the collapse of weekend peace talks, while the dollar rose and stocks and bonds fell.
The US move, aimed at putting pressure on Tehran, leaves a fragile ceasefire hanging in the balance and no end in sight to the choke on Middle East energy exports - though the mood on trading floors leaned toward hoping for a resolution.
Brent crude futures were up 7.3% at $102 a barrel - a gain of more than 40% since the war shut navigation of the Strait of Hormuz. S&P 500 futures were down 0.7% through the Asia day and European futures fell 1.4%.
US Treasuries and bonds around Asia traded lower, with Japan's benchmark 10-year yield hitting a 29-year high of 2.49%, though moves were relatively modest and took most assets to roughly where they sat before last week's ceasefire.
"The market is now largely back to conditions before the ceasefire, except now the US will block the remaining up to (2 million barrels) Iranian-linked flows through the Strait of Hormuz as well," said MST Marquee analyst Saul Kavonic.
Trump said on Sunday that the price of oil and gasoline may remain high into the midterm elections in the US in November, a rare acknowledgement of the potential political fallout from the war.
Dollar Higher
In foreign exchange trade the euro fell about 0.3% to $1.1687 and risk-sensitive currencies such as the Australian dollar slipped a little further.
Equity benchmarks from Hong Kong to Tokyo, Seoul and Sydney dropped around 1%.
With inflation fears reviving, investors are now bracing for central banks, such as the European Central Bank and Bank of England, tilting towards raising rates in a sharp reversal from pre-war bets on rate cuts or a prolonged pause.
The outlook is especially delicate in Japan, where traders expect rates to keep rising in the medium term but are cooling on the prospect of a hike this month while markets are volatile.
In emerging markets the Hungarian forint was up sharply, scaling multi-year highs on the dollar and euro, after Hungary's veteran nationalist leader Viktor Orban lost power to an upstart centre-right coalition at Sunday's election.
