Global share markets slipped on Monday as fresh drone attacks in the Gulf shoved oil prices and bond yields higher, increasing inflation concerns.
A drone strike caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three drones, as U.S. President Donald Trump warned that Iran must act “fast” to reach a deal.
Meanwhile, the vital Strait of Hormuz remains closed to all but a trickle of shipping as Tehran tries to formalise its control of the waterway that during normal times carries 20 percent of the world’s oil and gas trade.
Brent was trading up 1 percent at about $110.50 a barrel, while U.S. crude climbed 1.2 percent to $106.72 a barrel. Crucially, futures for September climbed above $100, and December hit a contract high as markets braced for protracted shortages.
G7 finance ministers are scheduled to gather in Paris on Monday to discuss the Strait of Hormuz and critical raw material supplies, though geopolitical differences threaten to test the group’s cohesion.
Reuters reported that global bond markets were hit again on Monday by concerns that energy costs would stay high and thus continue to drive inflation.
Yields on U.S. 10-year notes hit a 15-month top of 4.631 percent, having surged 23 basis points last week. Yields on 30-year bonds reached 5.159 percent after jumping 18 basis points last week.
Japan’s 10-year yield hit a peak not seen since 1996 as the government proposed to issue fresh debt to fund a planned extra budget to cushion the economic blow from the Iran war. Germany’s 10-year bond yield rose to a level not seen in 15 years.
A Reuters report noted that European stocks fell 0.5 percent, with major markets in Frankfurt, Paris, and London flat to down 1.1 percent.
Overnight, Japan’s Nikkei eased 1 percent, having fallen 2 percent last week from record highs. South Korean stocks rose 0.3 percent, as Samsung Electronics gained almost 4 percent after a court issued a partial injunction against a union strike.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.7 percent. Chinese blue chips lost 0.6 percent, as economic data disappointed. China’s April retail sales edged up 0.2 percent when analysts had looked for growth of 2.0 percent, while industrial output rose a sluggish 4.1 percent.
S&P 500 futures fell 0.4 percent, and Nasdaq futures lost 0.2 percent.
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The euro was little changed at $1.1630 after losing 1.4 percent last week. The pound was steady at $1.3353, having dived 2.3 percent last week as political instability in Britain added to already intense pressure on the gilt market.
The dollar held firm against the yen at 158.91, with only the threat of Japanese intervention preventing another speculative assault on the 160.00 chart barrier.
In commodity markets, gold was near flat at $4,544 an ounce, having drawn little support so far as a safe haven or as a hedge against inflation risks.
