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Middle East flare-up sets new tone in new week

Fears of an escalation in the US-Iran conflict kept investors on edge at the start of the week after a US Navy destroyer disabled and seized the Iranian-flagged cargo ship Touska in the Gulf of Oman on Sunday, following earlier Iranian fire on commercial vessels near the Strait of Hormuz. Oil prices jumped at the beginning of the week on concerns that the fragile ceasefire and peace efforts could unravel, even as gold and bitcoin eased and US Treasury yields continued to edge higher. Equity markets showed resilience, with US and European indices having rallied on Friday when Iran briefly reopened the Strait of Hormuz to commercial traffic, and Asian stocks trading mostly higher on Monday as technology shares offset geopolitical worries.

  • Data
  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

A US Navy destroyer disabled and seized the Iranian-flagged cargo ship Touska in the Gulf of Oman on Sunday after the vessel’s crew allegedly ignored radio warnings for around six hours, according to US President Donald Trump and US Central Command. The operation marks an escalation of a US naval blockade on traffic to and from Iranian ports that began last week and follows Iran’s firing on commercial ships trying to pass through the nearby Strait of Hormuz earlier Sunday. Oil prices surged on Monday, with Brent crude oil trading above USD 95 and West Texas Intermediate (WTI) around USD 88 per barrel, on fears that the ceasefire and peace negotiations between the US and Iran could fully collapse. Gold prices were retreating, trading around USD 4790 per ounce, while bitcoin was moving lower, hovering near USD 74100. US Treasury yields were edging higher across the curve, with the two-year and ten-year yields around 3.7% and 4.3%, respectively.

Geopolitics and data shape cautious trading

This week, market participants will keep a close eye on geopolitical developments in the Middle East, where the ongoing conflict between the US, Israel and Iran continues to influence risk sentiment and commodity prices. On the data front, inflation is in focus with the UK publishing March consumer and producer price indices on Wednesday, while Japan reports national inflation on Friday. Growth momentum will be assessed through a broad set of purchasing managers’ indices (PMI) on Thursday, when France, Germany and the wider euro area release PMIs, followed by the UK and US later in the day. Labour market dynamics in the US remain a key input for the Federal Reserve, with weekly initial and continuing jobless claims due on Thursday (Thursday) alongside the ADP employment change figure on Tuesday (Tuesday). Finally, sentiment indicators from both sides of the Atlantic, including the German and euro-area ZEW surveys (Tuesday), German ifo business climate data (Friday) and the University of Michigan consumer sentiment survey in the US (Friday), round out the week for investors.

Asia stocks mostly higher amid geopolitical risks

Asian equity markets edged higher on Monday, supported by technology shares, even as investors weighed rising tensions between the US and Iran. Japan’s Nikkei 225 was trading 0.7% higher and Korea’s Kospi was up 0.6%, helped by a more than 3% rise in chipmaker SK Hynix after it announced plans to produce a new server module for Nvidia’s next-generation chips. In China, the central bank kept its benchmark loan prime rates steady for an eleventh consecutive month on Monday, holding the one-year rate at 3% and the five-year at 3.5%, which coincided with a gain of roughly 0.4% in the CSI 300, while Hong Kong’s Hang Seng also rose 0.5%. India’s Nifty 50 futures gained 0.2%, and Australia’s S&P/ASX 200 lost 0.1%.

US stocks rally on Friday as Hormuz briefly reopens

US equities ended the week on a strong note on Friday after Iran announced that the Strait of Hormuz would be fully reopened to commercial traffic for the duration of the ceasefire, which seems to break down over the weekend. On Friday, the Nasdaq 100 rose 1.3% to a new record of 26672.43 points, leaving it up 6.2% for the week, while the S&P 500 gained 1.2% to 7126.06 points for a 4.5% weekly advance and the Dow Jones Industrial Average climbed 1.8% to 49447.43 points, still slightly below its all-time high.

Euro-area trade surplus narrows sharply

Euro-area trade in goods showed a surplus of EUR 11.5 billion in February, roughly half the EUR 23.1 billion recorded a year earlier, as exports to the rest of the world fell 6.7% to EUR 232.4 billion. European stock markets surged on Friday, lifted by the positive sentiment after Iran had briefly allowed passage through the Strait of Hormuz shipping lane. The Euro Stoxx 50 jumped 2.1%, while Germany’s DAX rose 2.3% and France’s CAC 40 added 2%. The Swiss Market Index also participated in the upswing, gaining 1.9% on the day.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Rio Tinto.

Economic data in focus: Bundesbank monthly report (12:00), Canadian Consumer Price Index (14:30), Bank of Canada Business Outlook Survey (16:30).

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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.