World shares mostly retreated and oil prices jumped on Monday after U.S. President Donald Trump warned Tehran that the “clock is ticking” as U.S.-Iran negotiations over a permanent end to the war stalled. The warning, delivered through a social media post after a call with Israeli Prime Minister Benjamin Netanyahu, rippled through markets already braced for more escalation, while ordinary people face the costs of a conflict managed from above.
Who Pays for the War Talk
U.S. futures fell and markets in Japan and South Korea pulled back from their records. In early European trading, Britain’s FTSE 100 edged up 0.1% to 10,205.31. France’s CAC 40 lost 0.9% to 7,883.42, and Germany’s DAX dropped 0.1% to 23,925.82. During Asian trading, Tokyo’s Nikkei 225 fell 1% to 60,815.95, a decline led by technology-related stocks. It reached all-time intraday high levels last week above 63,000.
The yield on the 10-year Japanese government bond surged to as high as 2.8%, its highest level since the late 1990s. That was part of a broader shift toward higher yields as the Bank of Japan gradually raises interest rates and higher energy costs raise expectations of rising inflation. The yield was around 2.55% just one week ago.
Seoul’s Kospi climbed 0.3% to 7,516.04 after trading lower earlier in the day. It crossed the 8,000 mark for the first time on Friday, supported by buying of technology shares driven by the boom in artificial intelligence, but later declined partly on profit-taking by investors. Hong Kong’s Hang Seng lost 1.1% to 25,675.18. The Shanghai Composite index edged 0.1% lower to 4,131.53, after China reported weaker-than-expected economic data for April. Australia’s S&P/ASX 200 declined 1.5% to 8,505.30. Taiwan’s Taiex dropped 0.7%, while India’s Sensex fell less than 0.1%.
The Strait, the Blockade, the Pressure
Oil prices rose after Trump warned Iran in a social media post that “the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them” following a call with Israeli Prime Minister Benjamin Netanyahu. Trump has set deadlines for Iran and then backed off, so investors have remained cautious about the situation in the Strait of Hormuz and how it is impacting global energy flows, including oil and gas. The strait is still mostly closed, and the U.S. has also imposed its own sea blockade on Iranian ports since last month.
A drone strike over the weekend on a United Arab Emirates’ nuclear power plant added to worries over a potential escalation in the conflict. A drone strike targeted the United Arab Emirates’ sole nuclear power plant on Sunday, sparking a fire on its perimeter. There were no reports of injuries or radiological release, but it highlighted the risk of renewed war as the Iran ceasefire remains tenuous.
Brent crude, the international standard, gained 0.7% to $110.05 per barrel. It was trading at roughly $70 a barrel in late February before the start of the Iran war. Benchmark U.S. crude was trading 1% higher to $106.49 per barrel.
“Re-escalation risks are increasing,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a research note. While there has also been a pick up on shipping activities over the past week around the strait, they said, “this can change quickly.”
The Big Powers Juggle Influence
The pair also noted that the oil market was reacting to the lack of tangible results on the Iran war after last week’s widely-watched summit between Trump and Chinese President Xi Jinping in Beijing, even as the White House said both the U.S. and China had agreed that the Strait of Hormuz must remain open. U.S. officials had hoped that Beijing could use its influence, given its economic ties with Iran, to help broker a peace agreement and reopen the strait. Trump said last week in an interview that Xi told him China “would like to be of help” in negotiating an end to the war. So far it’s been unclear how Beijing might do that.
The yield on the U.S. 10-year Treasury was at around 4.60%, up from 4.47% last Thursday and sharply higher than the nearly 4% level it was holding at before the Iran war. On Friday, the benchmark S&P 500 dropped 1.2% from the record it set the day before. The Dow Jones Industrial Average fell 1.1% and the technology-heavy Nasdaq composite lost 1.5%.
In other dealings early Monday, the U.S. dollar rose to 158.82 Japanese yen from 158.62 yen. The euro was trading at $1.1645, up from $1.1622.