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What is the story about?
Asian shares gained, while oil prices fell as the US and Iran edged towards a deal.
Japan's Nikkei index surged 2.7%, while Brent declined over 4.5% to around $98.8 a barrel on expectations that a deal would reopen the Strait of Hormuz.
The dollar weakened against most of its Group-of-10 peers, gold gained and Asian stocks rose as an agreement is expected to help resume the flow of energy through the vital Middle East artery and ease inflation pressures.
Treasury futures also gained, with cash trading closed today due to a US holiday. Markets in Hong Kong and London are also shut for public holidays. Yields for Japanese bonds slipped early Monday. Futures contracts for the S&P 500 rose 0.6%, after the underlying gauge climbed for eight straight weeks in the longest winning run since 2023.
Senior US officials said Sunday that the US and Iran were nearing a deal that would reopen the Strait of Hormuz, though negotiations over key language were continuing and final approval from both sides could still take several days. However, Iran’s Tasnim news agency cautioned that the draft agreement could yet collapse because the US is obstructing some key clauses, including Tehran’s demand that its assets be unfrozen.
The broad improvement in risk sentiment follows weeks of stalemate between the US and Iran after the two sides agreed to a ceasefire in April. Traders are closely tracking the economic fallout from the Middle East conflict after concerns about elevated oil prices and higher inflation sent bond yields to multi-year highs earlier this month.
US Personal Consumption Expenditures data and inflation readings across Europe will be in focus this week after bond yields rose to multi-year highs, prompting investors to speculate that central banks may have to hike interest rates. Traders have fully priced in a Federal Reserve rate hike by year-end, underscoring expectations that Kevin Warsh will need to act swiftly against inflation.
Warsh, who has promised the biggest shakeup in decades at the US central bank, was sworn into office Friday. President Donald Trump stressed that he wants Warsh to independently lead the Fed, as he looked to downplay investor concern that he would pressure the new central bank chief on policy decisions.
Strategists expect global bond yields to remain elevated even if a US-Iran deal eases oil-driven inflation pressures. Investors are also grappling with concerns that already large public debt burdens will continue to grow, while the capital demands of the AI investment boom are adding further strain to global funding markets.
Monday’s drop in oil comes as signs emerge that ships are beginning to transit the Strait after a supertanker hauling Iraqi crude to China crossed the US blockade line into the Arabian Sea.
Thirty-three vessels, including oil tankers, container ships and other commercial craft, sailed through the Strait of Hormuz over 24 hours after obtaining authorization from the Islamic Revolutionary Guard Corps Navy, the semi-official Iranian Students’ News Agency reported on Sunday, citing an IRGC statement.
With inputs from Bloomberg
Japan's Nikkei index surged 2.7%, while Brent declined over 4.5% to around $98.8 a barrel on expectations that a deal would reopen the Strait of Hormuz.
The dollar weakened against most of its Group-of-10 peers, gold gained and Asian stocks rose as an agreement is expected to help resume the flow of energy through the vital Middle East artery and ease inflation pressures.
Treasury futures also gained, with cash trading closed today due to a US holiday. Markets in Hong Kong and London are also shut for public holidays. Yields for Japanese bonds slipped early Monday. Futures contracts for the S&P 500 rose 0.6%, after the underlying gauge climbed for eight straight weeks in the longest winning run since 2023.
Senior US officials said Sunday that the US and Iran were nearing a deal that would reopen the Strait of Hormuz, though negotiations over key language were continuing and final approval from both sides could still take several days. However, Iran’s Tasnim news agency cautioned that the draft agreement could yet collapse because the US is obstructing some key clauses, including Tehran’s demand that its assets be unfrozen.
The broad improvement in risk sentiment follows weeks of stalemate between the US and Iran after the two sides agreed to a ceasefire in April. Traders are closely tracking the economic fallout from the Middle East conflict after concerns about elevated oil prices and higher inflation sent bond yields to multi-year highs earlier this month.
US Personal Consumption Expenditures data and inflation readings across Europe will be in focus this week after bond yields rose to multi-year highs, prompting investors to speculate that central banks may have to hike interest rates. Traders have fully priced in a Federal Reserve rate hike by year-end, underscoring expectations that Kevin Warsh will need to act swiftly against inflation.
Warsh, who has promised the biggest shakeup in decades at the US central bank, was sworn into office Friday. President Donald Trump stressed that he wants Warsh to independently lead the Fed, as he looked to downplay investor concern that he would pressure the new central bank chief on policy decisions.
Strategists expect global bond yields to remain elevated even if a US-Iran deal eases oil-driven inflation pressures. Investors are also grappling with concerns that already large public debt burdens will continue to grow, while the capital demands of the AI investment boom are adding further strain to global funding markets.
Monday’s drop in oil comes as signs emerge that ships are beginning to transit the Strait after a supertanker hauling Iraqi crude to China crossed the US blockade line into the Arabian Sea.
Thirty-three vessels, including oil tankers, container ships and other commercial craft, sailed through the Strait of Hormuz over 24 hours after obtaining authorization from the Islamic Revolutionary Guard Corps Navy, the semi-official Iranian Students’ News Agency reported on Sunday, citing an IRGC statement.
With inputs from Bloomberg
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