US Oil Prices Fall as Trump Threats Disrupt Markets
Global markets got a jolt early in the Asian session hours after President Donald Trump called for the evacuation of Tehran, in comments that contrasted with earlier optimism that Israel’s war with Iran would not escalate into a broader conflict.
US futures fell and oil rose nearly 2% following Trump’s comments in a social media post from a Group of Seven leaders summit in Alberta. It was unclear what he meant, but hours earlier, Trump said Iran wanted to make a deal. Oil prices had earlier fallen on signs that the Middle East conflict could avoid disrupting crude production.
Equity futures showed small gains in Tokyo and Hong Kong, and a flat open in Sydney, after risk sentiment returned to Wall Street on Monday and pushed the S&P 500 up about 1%. There were mixed signs that investors remain confident in the US economy, with longer-dated Treasuries continuing to lag the market even after a $13 billion 20-year bond sale delivered expected yields — a significant improvement from last month’s disappointing auction that spurred a major selloff. The dollar was little changed.
Trump earlier said Iran wanted to talk about de-escalating the conflict with Israel even as the two sides exchanged fire for a fourth straight day. Asked whether the U.S. would get more involved militarily, the U.S. leader said he did not want to discuss it.
Tehran has signaled it wants to ease hostilities with Israel and is willing to resume nuclear talks with the U.S. as long as Washington does not join an Israeli strike, the Wall Street Journal reported Monday, citing unidentified Middle Eastern and European officials. A similar report by Reuters said Iran conveyed the message through Qatar, Saudi Arabia and Oman.
The outbreak of hostilities between Israel and Iran disrupted momentum that had pushed the S&P 500 back near record levels. While markets initially took a cautious and risk-averse stance to gauge how the conflict might play out, sentiment improved on Monday as investors speculated the strike was unlikely to draw more parties.
"The focus will remain on geopolitical headlines, but as long as the conflict remains confined to Israel and Iran, it is unlikely to have a significant impact on markets," said Tom Essaye at The Sevens Report.
Investors in Asia will be watching the Group of Seven summit in Alberta, Canada, where Trump will meet Japanese Prime Minister Shigeru Ishiba on Monday. Tokyo is seeking a complete removal of U.S. tariffs, including a 25% levy that has hit key auto exports. Without a deal, the world’s fourth-largest economy could slide into a technical recession.
The mood in China improved on Monday as data showed unexpectedly strong retail sales in May provided some relief for the economy from U.S. tariffs. However, the momentum may not last long as deflationary forces continue to persist and the housing market slump shows signs of deepening.
While market sentiment is calmer in the U.S., the Middle East remains tense. Israel launched an attack on the South Pars gas field, forcing the shutdown of a production platform, following attacks on Iranian nuclear sites and military leaders last week. However, crucial crude export infrastructure has so far been spared and there has been no blockage of the vital Strait of Hormuz.
Middle Eastern producers ship about a fifth of the world’s daily output through the narrow waterway, and prices could spike further if Tehran tries to disrupt shipments through the route.
Source: Bloomberg
