Oil Surges, Global Markets Fall After U.S. Strike on Iranian Rocket Launchers

Markets Slide as Oil Prices Jump After S. Strike

BANGKOK — Oil prices surged and global equities retreated Monday after S. forces struck Iranian rocket launchers in the Strait of Hormuz, the first American military action in the region in a month. Brent crude, the international standard, rose about 3% to trade above $90 a barrel, while S. benchmark crude climbed to around $86, according to multiple reports.

Stephen Innes of SPI Asset Management captured the sentiment in a commentary: "The Middle East had finally gone quiet enough for oil traders to start sanding some of the war premium out of crude. Then Sunday arrived, with a reminder that quiet in the Strait of Hormuz is not the same as peace."

The strike broke a lull in a conflict that has lasted more than six months, and analysts pointed to a significant risk of escalation. The Trump administration had just days earlier shifted its focus to economic pressure on Iran, and a return to open conflict could prove dangerous for the region, as reported by The New Indian Express.

Asian Markets and S. Futures Decline

Asian markets were mostly lower on Monday. Japan's Nikkei 225 lost 0.4%, South Korea's Kospi fell 0.5%, and Hong Kong's Hang Seng dropped 0.4%, while the Shanghai Composite gained 0.4%, according to The New Indian Express. Australia's S&P/ASX 200 slipped 0.2%, and Taiwan's Taiex fell 0.4%.

S. stock futures also pointed to a weaker open on Wall Street. Barchart reported that futures for the S&P 500 and the Dow Jones Industrial Average both declined 0.2% on Monday, with Nasdaq futures slipping 0.1%. Other reports put the decline at 0.3%, though the exact percentage remains unresolved across sources. In early trading, the S&P 500 slipped 0.3% and the Dow dropped 282 points, or 0.5%, while the Nasdaq fell 0.1%, as reported by Barchart.

The declines were driven not only by the military strike but also by expectations that the Federal Reserve may soon raise interest rates. Markets in Asia fell following a speech Friday by Fed Chairman Jerome Powell that reinforced expectations the central bank will do what is needed—such as raising rates—to bring inflation down despite possible short-term pain for the economy, The New Indian Express reported.

Fed Rate Hike Expectations and Treasury Yields

Wall Street is bracing for a potential rate hike from the Federal Reserve following Powell's speech at the annual economic symposium in Jackson Hole, Wyoming. Powell was adamant that he wants to give financial markets fewer clues about the Fed's plans, but he acknowledged that "short-term interest rates are the predominant tool" for the Fed to do its job, as reported by Barchart.

The yield on the 2-year Treasury jumped to 4.35% from 4.22% just before the speech, according to Barchart. The yield on the 10-year Treasury rose to 4.75%, around the level seen two weeks ago, while the 30-year yield also increased, according to Barchart.

President Donald Trump, who appointed Powell, has consistently lobbied for lower rates, but Powell's remarks have reinforced expectations of a potential hike to combat inflation, Barchart reported.

Oil Prices and Gasoline Costs

Oil prices surged more than 3% after the S. strike on Sunday. In early Asian trading, Brent crude rose 2.9% to $90.61 per barrel, while S. benchmark crude jumped 2.7% to $85.66 per barrel, The New Indian Express reported. By later trading, Barchart reported Brent jumping 3.4% to $91.10 per barrel and S. crude trading 3.6% higher at $86.40 per barrel, reflecting a continued upward trend.

The rising oil prices are adding to economic pressures, including in the United States. The national average for gasoline has been above $4 per gallon every day in August for the first time ever, according to the AAA. It has been the most expensive August at the pump on record, outpacing even the supply chain crunch during the COVID-19 pandemic in August 2022, Barchart reported.

Corporate and Market Movers

In equities trading, GameStop surged more than 5% before the market opened after providing a preliminary second-quarter earnings outlook above its year-ago results, Barchart reported. Shares of Aon fell slightly as the company announced it was buying insurance broker USI Insurance Services from private equity firm KKR in a deal valued at $17 billion, including debt, according to Barchart.

In currency markets, the euro rose to $1.1602 from $1.1580, while the S. dollar fell to 159.72 Japanese yen from 160.10 yen, Barchart reported. The dollar had rebounded earlier after a rare coordinated intervention by the S. Treasury and Japanese regulators in late July, but subsequently declined, The New Indian Express noted.

Bitcoin has been on a tear this month, rising about 25%, and was up about 1% on Monday to $78,625, Barchart reported.

Regional Developments

In Hong Kong, shares of e-commerce and fast fashion giant Shein are due to begin trading on Tuesday in the city's biggest initial public offering this year, part of a trend toward big Chinese-founded companies raising funds in Chinese markets, The New Indian Express reported.

An official survey released Monday showed Chinese factory activity remained in contraction for a second straight month in August, though there were slight improvements in some areas such as new export orders and production, according to The New Indian Express.

Later this week, the S. Labor Department reports August jobs data. In July, employers cut 23,000 jobs, and revisions slashed another 103,000 jobs from May and June payrolls, Barchart reported.

Markets in Britain were closed for a bank holiday, Barchart reported.