Oil Prices Rise Amid Global Concerns Over Escalation of Tensions with Iran

Global Markets Retreat as Trump Warns Iran of 'Extremely Hard' Response

New York/London - Oil prices surged on Thursday, while global equity markets retreated, after remarks by U.S. President Donald Trump dashed hopes of a swift resolution to the Iran war. The situation remains volatile, with Iran drafting a protocol with Oman to monitor traffic in the narrow Strait of Hormuz, through which a fifth of global oil and liquefied natural gas is shipped.

The Strait of Hormuz has been at the center of tensions between the United States and Iran. Trump's comments on Wednesday, in a prime-time address, that the United States would hit Iran "extremely hard" in the coming weeks and "bring them back to the Stone Ages where they belong," sent shockwaves through the markets. Brent crude surged more than 7% to $108.84 a barrel, while U.S. West Texas Intermediate settled up 11.41% to $111.54.

Global equity markets also felt the impact of Trump's remarks. The MSCI's gauge of stocks across the globe fell 0.59% to 990.80. On Wall Street, the Dow Jones Industrial Average fell 0.39% to 46,383.81, the S&P 500 declined 0.23% to 6,560.04, and the Nasdaq Composite lost 0.28% to 21,780.32.

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Market Performance

The pan-European STOXX 600 index and Europe's broad FTSEurofirst 300 index both lost 0.2%. South Korea's Kospi index slid 4.7%. The only thing that really matters, according to Prashant Newnaha, senior rates strategist at TD Securities, is whether the Strait of Hormuz will open soon.

Gold prices fell as the U.S. dollar gained. Spot gold dropped 2.15% to $4,654.89 an ounce, and U.S. gold futures settled down 2.8% at $4,679.70. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, climbed 0.48%.

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Government bond yields jumped on expectations that an inflation spike would force central banks to raise interest rates, or at least keep them on hold. The yield on benchmark U.S. 10-year notes fell 1.4 basis points to 4.307%. The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.9 basis points to 3.794%. Euro zone benchmark Bund yields snapped a three-day decline, and traders raised bets for interest-rate hikes. The yield on the benchmark German 10-year added 0.7 basis points to 3.002%.