Oil prices surged on Monday (13 April) as the U.S. 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 U.S. 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 STXec1 fell 1.4%.
U.S. 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 U.S. 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.
"The key remaining question is if the U.S. renews strikes on Iran, raising the risk of strikes on energy infrastructure across the region which could have a further lasting impact beyond the duration of the war."
The Wall Street Journal reported President Donald Trump and his advisers were weighing limited strikes on Iran, though there were no immediate reports of attacks in the Asia day.
Trump said on Sunday that the price of oil and gasoline may remain high into the midterm elections in the U.S. in November, a rare acknowledgement of the potential political fallout from the war.
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%.
"The market is saying that it doesn't believe Trump is going to strike more military assets or take over the Strait of Hormuz," said Russel Chesler, head of investments and capital markets at VanEck in Sydney.
However, he added, there were growing worries about inflation, which would intensify the longer the oil shock lasts.
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.
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Yemen’s Houthis have claimed responsibility for the recent drone and missile strikes on Saudi Aramco facilities in Dhahran and Riyadh and at King Khalid International Airport in Saudi Arabia, vowing to carry out more attacks in the coming days.
The Saudi-led coalition said early Thursday that it intercepted and destroyed a drone over Saudi Arabia’s Eastern Province.
The Saudi-led coalition in Yemen said late Monday that it intercepted and destroyed two ballistic missiles launched by the Houthi group toward Khamis Mushait in southwestern Saudi Arabia.
Ukrainian President Volodymyr Zelenskyy says Russia hit at least six energy targets in deadly strikes across Ukraine, showing Moscow is unwilling to accept the energy ceasefire announced by U.S. President Donald Trump.
Ukraine's soldiers have had their access to Starlink satellite internet restricted. Kyiv's troops use the terminals, made by Elon Musk's SpaceX, to pilot drones. A source in Ukraine's Defence Ministry said the restrictions would make it harder for Kyiv's army to down Russian drones.
The leader of Yemen's Saudi-backed government announced the beginning of a major military operation against the Iran-backed Houthis on Sunday, aimed at seizing the territory under their control.
Iran says the Strait of Hormuz will remain closed until the United States meets seven conditions agreed under a June memorandum, as President Donald Trump signals he may soon decide whether to resume military operations against Tehran.
Governments from the Persian Gulf to the Horn of Africa are hedging against a conflict they cannot control, with contingency plans beginning to reshape trade routes, alliances and the regional map.
A supertanker which was cruising through the Strait of Hormuz was targetted by an unknown projectile off the coast of Oman, according to an Iranian news agency which said the vessel was “violating” navigation rules at the Strait of Hormuz on 1 October.
Iranian President Masoud Pezeshkian has accused the U.S. and Israel of seeking to foment internal divisions in Iran after failing to defeat the country militarily, Iran's state news agency IRNA reported.
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