Oil surges on Gulf attacks, lifting yields and hitting Asian equities
A sudden surge in oil prices following attacks in the Gulf has re-ignited Federal Reserve rate hike expectations, pushing Asian equities lower and lifting the dollar.
Brent crude climbed 3.3% to $78.50 a barrel in early trade, while U.S. crude added 3.4% to $73.83, driven by fresh attacks in the Gulf. U.S. officials noted about 20 vessels were escorted through the strait over the previous 24 hours, though ship tracking data showed minimal traffic moving.
The oil spike pushed 10-year Treasury yields up 2 basis points to 4.59%, while Fed fund futures priced in 34 basis points of policy tightening by year-end. The dollar index held firm at 101.12, with the euro easing to $1.1403 as Europe's higher reliance on foreign oil amplified the impact.
The prospect of elevated rates dragged on regional equities, with Japan's Nikkei falling 1.0% and the broader MSCI Asia-Pacific ex-Japan index losing 0.2%. S&P 500 futures dropped 0.3% and Nasdaq futures lost 0.5% as investors braced for a heavy week of corporate earnings.
South Korea's market, a global bellwether for the semiconductor sector, fell 0.4% after an 8% plunge last week as leveraged chip bets unwound. The tech sector is also monitoring the fallout from Apple's after-hours lawsuit against OpenAI and two former employees for trade secrets theft.
In currency markets, the dollar added 0.1% against the yen to 161.96, recovering some ground lost after Japanese Finance Minister Satsuki Katayama suggested encouraging the $1.8 trillion Government Pension Investment Fund and other retirement vehicles to repatriate funds.
Focus now shifts to Washington, where Federal Reserve Chair Kevin Warsh faces Congress for the first time in his new role on Tuesday. Investors will also parse June inflation figures on the same day, looking for a cooldown from the 4.2% headline rate, though the recent oil rebound threatens to reverse that relief. Major U.S. banks kick off the earnings season on Tuesday, followed by Netflix and General Electric.
