Live updates: Follow the latest news on the Iran war
Oil prices surged, equities retreated and precious metals weakened as a hawkish speech by US President Donald Trump dashed hopes of a quick end to the Iran war that has trigged a global energy crisis.
Brent, the benchmark for about two third of the world’s oil, jumped 7.78 per cent to settle at $109 per barrel. West Texas Intermediate, the gauge that tracks US crude, leapt 11.41 per cent to close at at $111.50 a barrel.
The sharp swing in crude prices, which rose a record 60 per cent in March, followed Mr Trump's televised address to the nation on Wednesday.
The markets had been banking on an announcement from Washington on a quick resolution to the conflict. Instead, they were rattled when Mr Trump promised to hit Iran “extremely hard” in the next two to three weeks and to send the nation back into the “Stone Ages”.
The extreme volatility underpinned fears that the Iran war could continue without a clear timeline.
“Oil prices fell during regular trading hours yesterday as ceasefire optimism built through the day. However, President Trump's hawkish prime-time address reversed those gains sharply,” said Mayed Alrashdi, research analyst at Emirates NBD.
Brent prices, which touched an intraday high of the almost $120 a barrel on March 19, had been on the decline in recent days, after Mr Trump signalled a possible resolution to the Middle East conflict within weeks.
However, renewed promise of attacks on Iranian oil facilities has added to uncertainty. Tehran has effectively closed the Strait of Hormuz, the narrow waterway through which a fifth of global oil and gas supplies normally pass through.
“Statements by US President Donald Trump represent, in my opinion, a psychological turning point in the market rather than just a political stance,” said Rania Gule, senior market analyst at XS.com.
Threats to energy infrastructure in a sensitive region such as the Gulf revive scenarios of supply disruption that have previously driven sharp price increases, Ms Gule said.
“I believe traders are not waiting for such events to occur but are already pricing in their probability, which explains the rapid surge in prices.”
The choking of supplies of crude, gas and products such as diesel to markets, has triggered a global energy crisis, which is also stoking inflation fears.
Though Mr Trump in his speech said the military campaign is “very close” to completion, he told countries that rely on energy supplies from the Gulf region to take the lead in protecting shipments through the strait.
The UAE is among Gulf nations calling on the United Nations to authorise any means necessary to re-open the strait. However, Iran’s Foreign Minister Abbas Araghchi has said Iran and Oman will decide the waterway's future.
On Monday, the heads of the International Energy Agency, International Monetary Fund and the World Bank Group said they had agreed to form a co-ordination group to maximise their response to the energy and economic impacts of the war.
The war has led to “market volatility, weakening of currencies in emerging economies, and concerns about inflation expectations rais[ing] the prospect of tighter monetary stances and weaker growth”, the three institutions said.
Slumping equities
Equities across most markets in Asia, the Gulf and Europe slumped amid the increasing uncertainty.
The MSCI Asia Pacific Index fell as much as 2.1 per cent, the MSCI Emerging Markets Index declined 2 per cent, while Japan’s Nikkei slid 2.38 per cent.
Hong Kong's Hang Seng fell 0.84 per cent. The Shanghai Composite Index declined 0.74 per cent, while stocks in India slumped 1.12 per cent.
Most stocks in the Gulf region also slid, with Dubai's DFM General Index dropping 0.61 per cent and the main equities measure in Abu Dhabi ending trade 0.7 per cent lower.
Qatar's QE Index also slipped 0.42 per cent, while the main stocks gauge in Bahrain was little changed. The Kuwaiti benchmark slid 0.18 per cent.
The Tadawul All Share Index in the Saudi Arabia, however, bucked the trend along with stocks in Muscat. The Saudi market rose by 0.25 per cent, while the main index in Muscat advanced by 0.6 per cent.
Shares in Europe slumped, with the FTSE 100 Index declining 0.55 per cent. The CAC 40 Index in Paris and DAX 30 in Germany were down 1.38 per cent and 2.40 per cent, respectively.
US equities futures mimicked the market mood in Asia and Europe, with S&P 500 futures falling 1.51 per cent and Nasdaq 100 futures dropping 1.93 per cent.
Currencies and gold
Currency markets echoed the cautious mood, with the dollar strengthening as investors sought safe-haven assets.
Rising bond yields also pointed to expectations that central banks may need to keep interest rates elevated for longer, limiting the scope for monetary easing.
In commodities, gold prices fell 3.36 per cent, retreating from recent highs to around $4,624.38 per ounce. A stronger dollar and higher Treasury yields reduced the appeal of non-yielding assets such as bullion. Other precious metals also weakened, with silver, platinum and palladium posting losses.
