Oil volatility and war tensions continue to shape global market sentiment. Photo / 123rf
Oil volatility and war tensions continue to shape global market sentiment. Photo / 123rf
The New Zealand sharemarket has bounced back strongly after comments from President Donald Trump declaring the Middle East war “pretty much” over sent US stocks skyward at the end of Monday’s session.
The S&P/NZX50 was up over 1% in early morning trading reversing some of yesterday’s decline which saw thelocal bourse fall more than 3% after a spike in oil prices.
All three major US indices moved suddenly higher after Trump’s comments were reported, with the Dow Jones Industrial Average finishing 0.5% up at 47,740.80, a swing of 1125 points from earlier in the day.
Trump told CBS News in a phone interview that the war was “very complete” and that the United States was “very far” ahead of his initially planned timeframe of four to five weeks, without giving details of any solution to the conflict still raging in the Middle East.
Trump’s “comment turned things on a dime”, Art Hogan of B. Riley Wealth Management said.
Besides questions about the place of Iran and the state of the Middle East after Israeli attacks on Lebanon and Iran’s retaliation against neighbouring countries, the energy market remains in turmoil after the essential closure of the Strait of Hormuz.
But Trump, who had on Friday (local time) declared on social media that only Iran’s “unconditional surrender” would end the hostilities, appears to be rethinking the situation, given the war’s unpopularity and its harmful impact on financial markets, according to Hogan.
Major US equity indices spent most of the day in the red, following a day of declines on European and Asian markets at the latest surge in oil prices.
After increasing by around 30% during Asian trading, international benchmark Brent and the main US oil contract WTI both pared gains and slid back under US$100 ($168) per barrel.
Brent finished up 6.8% at US$98.96 a barrel, while WTI gained 4.3% to US$94.77 a barrel.
Both contracts were later in negative territory in after-hours trading following Trump’s comments to CBS News.
Iranian retaliatory attacks have all but halted maritime traffic through the Strait of Hormuz, through which a fifth of global crude oil and liquefied natural gas pass.
All eyes will be on the Strait of Hormuz in the coming days.
“The surge higher for the price of oil is significantly increasing stagflation risks for the global economy and could trigger a deeper sell-off in global equity markets,” analyst Lee Hardman at the Mitsubishi UFG financial group said.
Stagflation refers to a period of high inflation coupled with economic stagnation.
Strait of Hormuz. Photo / Getty Images
Key figures at around 2140 GMT
Brent North Sea Crude: UP 6.8% at US$98.96 per barrel.
West Texas Intermediate: UP 4.3% at US$94.77 per barrel
