Asian Stocks Rise, Oil Rises on Israel-Iran Report
Oil prices rose after CNN reported that U.S. intelligence has indicated Israel is making preparations for a possible strike on Iran’s nuclear facilities. Stocks in Asia rose on Wednesday.
West Texas Intermediate rose 1.5% to $62.96 a barrel. It was unclear whether Israeli leaders had made a final decision to carry out a strike, CNN said, citing unnamed officials. Futures for the S&P 500 and Nasdaq 100 fell 0.1%, paring most of their early losses. The Swiss franc and yen, traditional safe havens, were slightly higher.
Benchmarks in Australia, South Korea and Japan all rose, pushing an index of Asian stocks 0.4% higher in early trade. Geopolitical tensions could add to the drag on markets, which have calmed recently after a month of turmoil over tariffs imposed by U.S. President Donald Trump. Investors are scrutinizing charts for clues on whether the rally in stocks can last, with the S&P 500 nearing a level that some technicians consider a sign of overheating after six straight days of gains put the index on the brink of a bull market.
"There's little question that momentum in equity markets is strong. That said, the market is overbought in the near term, so it could take a pause at any time," said Matt Maley at Miller Tabak. "But unless that pause turns out to be a serious reversal, a retest of those all-time highs is very likely soon." Oil prices have been volatile since last week on mixed headlines about the fate of Iran-U.S. talks, which could pave the way for more barrels to return to a market that is expected to be oversupplied later in the year. An Israeli strike would hamper any progress in those negotiations and add to volatility in the Middle East, which supplies about a third of the world's oil.
The tensions boosted demand for haven assets in early Asian trading, sending the dollar lower. “The U.S. dollar has certainly lost its appeal as an undisputed safe haven,” said Richard Franulovich, head of FX strategy at Westpac Banking Corp. As such, “this periodic geopolitical turmoil is going to show up more strongly in alternatives like the yen and Swiss franc going forward.” Meanwhile, Federal Reserve Bank of St. Louis President Alberto Musalem said tariffs are likely to weigh on the U.S. economy and weaken the labor market. Musalem said the Fed can provide a “balanced response” to inflation and employment as long as Americans’ future price outlook remains anchored to the central bank’s 2% target.
Long-term Treasury yields rose on Tuesday as contentious U.S. budget negotiations continued to focus on growing deficit spending, with traders betting that spending will surge even further. Trump has grown increasingly frustrated with demands to significantly increase the cap on state and local tax deductions, a senior administration official said, signaling an impasse as Republicans aim to quickly pass a massive tax-cutting bill.
Source: Bloomberg
