Global Market Today: Asian stocks drop as Iran talks stall, oil gains

Stocks in Asia dropped at the open, sending the MSCI Asia Pacific Index down 0.1%. While Wall Street gauges edged lower on Thursday, Nasdaq 100 futures rose 0.6% early Friday on optimism sparked by Intel Corp.’s earnings. The chipmaker jumped 19% in after-hours trading after its sales forecast topped expectations. Semiconductor stocks were outliers in the US session, climbing for a 17th consecutive day.

Souring risk appetite, global crude benchmark Brent opened 1.1% higher to $106.20 a barrel on Friday as geopolitical risks intensified. An index of the dollar held its gains from the prior session and is set for its best run this month. Treasuries held their losses made during the US session as higher oil prices stoked inflation concerns.

Investors remained cautious as markets hinge on whether Iran tensions escalate or shift toward diplomacy. Traders will watch signals from Washington and Tehran, along with shipping flows, for clues on energy supply risks, with any Strait of Hormuz disruption likely to keep oil elevated and weigh on global economic growth.

“There’s a fair bit of uncertainty when it comes to diplomacy between the two sides,” said Fawad Razaqzada at Forex.com. “Less comforting is the ongoing lack of clarity around the Strait of Hormuz. With no clear plan to reopen it, uncertainty remains elevated.”

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The prospect of Iran agreeing to more in-person peace talks with the US is being hindered by President Donald Trump’s threats and brash social media posts, according to several officials with knowledge of the diplomatic efforts to end their war.
Late Thursday in the US, Trump said Israel and Lebanon will extend their ceasefire by three weeks. The move creates space to work on a long-term deal and removes a roadblock to ending the US war with Iran.Earlier, Trump ordered the US Navy to fire on any vessel laying mines in the strait, while adding Tehran wants a deal and talks are underway. Also, US forces boarded a supertanker carrying Iranian oil in the Indian Ocean as the navy stepped up its blockade of the Islamic Republic’s shipping. Tehran continues to keep Hormuz effectively closed, preventing the passage of hundreds of millions of barrels of oil and fuel as well as other commercial traffic.

“As long as flows through the Strait remain restricted, the market keeps tightening and oil inventories keep falling, oil prices will remain supported,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.

In Asia, the yen was flat early Friday after weakening against the dollar for a fourth session on Thursday.

Japan’s Finance Minister Satsuki Katayama warned that officials are in close contact around the clock with their US counterparts as Tokyo remains on high alert over speculative moves that are keeping the yen weak.

In other corners of the market, gold opened little changed on Friday after declining in its previous session. Elsewhere, Bitcoin was steady, trading at around $78,000.

While markets have whipsawed on geopolitical risks, corporate profits have remained strong. Nearly 80% of the US equity benchmark’s firms have beaten first-quarter earnings estimates so far, according to data compiled by Bloomberg.

While volatility increased with the onset of the Iran conflict, financial markets have proven relatively resilient, noted Adam Hetts and Oliver Blackbourn at Janus Henderson.

“Investors coalesced around the critical assumption that hostilities and the associated disruptions to the global economy would be short lived,” they said. “Our sentiment and positioning indicators showed drawdowns within several market segments reaching capitulation territory and could therefore represent attractive entry points.”