Oil ontinues to rise as Middle East conflict enters fifth day

News that the U.S. will provide insurance for ships passing through the Strait of Hormuz didn’t immediately calm nervous oil investors as Brent crude pushed back above $84 a barrel. Selling in government bonds eased as sentiment improved somewhat, with U.S. Treasury yields edging up slightly. U.S. equity futures point to another day of falls as traders weigh mixed signals. Stocks in Japan and Korea fell dramatically Wednesday, but selling in European stocks eased at market open. Outside of the conflict, investors watch for ADP private payrolls data in the U.S., while the Federal Reserve’s Beige Book should give an on-the-ground picture of U.S. business sentiment. —U.S. equity futures nudged down in early European trade. Futures for the S&P 500 were down 0.2%, while the Dow Jones Industrial Average declined 0.25%. The tech-heavy Nasdaq fell 0.4%, though premarket moves among mega cap technology stocks were muted as Nvidia edged down 0.4%. —Asian equities fell heavily. South Korea’s benchmark Kospi index tumbled 12% to the close, a record one-day drop, with the country’s shippers hit by concerns over higher fuel costs as well as restricted shipping through the Strait of Hormuz. The Korea Exchange briefly suspended trading twice to cool volatility after sharp selloffs. Shipper Pan Ocean plunged 17%, while index heavyweight Samsung Electronics lost 12%. Meanwhile, Japan’s Nikkei Stock Average fell 3.6%, posting its largest one-day decline since April. Taiwan’s Taiex lost 4.35%, Hong Kong’s Hang Seng Index dropped 2.5%, and Singapore’s FTSE Straits Times Index fell 2.7%. —Europe’s blue-chip indexes were mostly up at the opening bell as markets found respite after two days of intense selling. Software stocks rallied in Germany and the U.K., helping the DAX and FTSE 100 to rise 0.6% and 0.1%, respectively. The CAC 40 rose 0.4% in Paris, as automakers staged a limited recovery after falling heavily on the conflict. Autos also helped Italy’s FTSE MIB to gain 0.2%, while defense group Leonardo jumped 2%. The Spanish IBEX 35 is the one exception. The index fell 0.3% after banks extended losses. —The dollar eased after reaching a three-month high Tuesday. The DXY dollar index fell 0.1% to 98.928, having reached a high of 99.683 Tuesday. Meanwhile, the Indian rupee weakened sharply against the dollar, dragged by the prospect of prolonged military conflict in the Middle East. The dollar recently traded at 92.19 rupees Wednesday, according to LSEG data, after trading at 91.05 rupees Friday. —U.S. Treasury yields rose further, with the 10-year yield last up 2.7 basis points at 4.084%. Investors continued to focus on the potential inflationary impact of high oil prices as the Middle East conflict deepens. However, the pace of the Treasury selloff is slowing, which could signal that investors will soon use Treasurys as safe havens. In contrast, Eurozone government bond yields declined. Government bond supply will be very light on Wednesday, with only Germany due to sell 1 billion euros in the February 2033-dated green Bund. Ten-year eurozone government bond yields fall by around 1 bp across the board. —Oil prices extended gains. In early trading, Brent crude rose 3.1% to $83.92 a barrel, while WTI was up 2.4% to $73.62 a barrel. President Trump’s commitment to provide protection for tankers transiting the Strait of Hormuz “is welcome news, but clearly it won’t happen overnight,” analysts at ING said. “Naval escorts will be sitting ducks to Iranian attacks.” —Severe supply disruptions in the Middle East are raising the prospect of increased competition for LNG cargoes, keeping European natural-gas prices elevated. In early trading, the TTF benchmark rose 2% to 55.34 euros a megawatt-hour after hitting a three-year high in the previous session. —Gold prices rebounded from the previous trading session, boosted by safe-haven demand. Futures in New York rose 1.1% to $5,177.30 a troy ounce, and silver rose 1.5% to $84.78 an ounce. “In the near term, gold remains caught between safe-haven demand and macro pressure,” analysts at ING said. —Bitcoin and ether have showed resilience in recent days as both continued to move sideways, Trade Nation analyst David Morrison said in a note. Bitcoin was holding above the $60,000 support level while meeting resistance at $70,000, he said. The daily Moving Average Convergence Divergence for both cryptocurrencies look “quite constructive,” having risen from oversold levels, he says. Bitcoin rose 1.6% to $69,195, LSEG data shows. Ether gained 1.7% to $2,002.