Tensions between Iran and the U.S. are putting pressure on Asian stock markets. On Monday, major stock indexes declined as investors awaited a possible retaliatory strike from Iran, while oil prices climbed to a five-month high.
Despite the rising geopolitical tensions, overall reaction in financial markets was relatively calm. The U.S. dollar slightly strengthened as a “safe-haven” asset, but no significant moves were seen in the bond market. Brent crude rose 1.4% to $78.07 per barrel. U.S. WTI crude also increased by the same percentage, reaching $74.88.
The risk in the Strait of Hormuz is shaking the oil markets
Investors are concerned about any potential Iranian military response or disruption of shipping in the Strait of Hormuz. This narrow waterway handles about a quarter of global oil trade and 20% of liquefied natural gas shipments.
Goldman Sachs analysts warn that if the Strait of Hormuz is closed for one month, Brent crude could temporarily reach $110 per barrel. Vivek Dhar, an analyst at Commonwealth Bank of Australia, says that if Iran selectively disrupts tanker movements, prices could reach at least $100.
The markets are in balance
The MSCI index of Asia-Pacific shares dropped by 1%. China’s CSI300 index fell 0.2%, and Japan’s Nikkei also declined by 0.2%. Still, the return to growth in Japan’s manufacturing sector in June was seen as a positive sign by market participants.
European stock markets also showed negative sentiment – EUROSTOXX 50 futures declined by 0.4%, FTSE by 0.3%, and DAX by 0.4%. This highlights the heavy dependence of European and Japanese economies on imported energy. Meanwhile, the United States remains relatively safe as a net energy exporter. Read 'Zamin' on Telegram!
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