(Bloomberg) – U.S. equity index futures fell and oil extended gains after President Donald Trump signaled a further escalation in the war on Iran, adding to the risk of energy panic already looming in the global economic outlook.
Futures contracts for the S&P 500 Index fell 0.2% as traders cut back on predictions that higher energy prices will hold up inflation and hurt economic growth. Brent rose 2% to trade above $111 a barrel in early trading on Monday, taking gains this year to more than 80%. Gold fell 1% to $4,630 an ounce. The Bloomberg Dollar Spot Index rose 0.1%.
Trump renewed threats on Sunday to attack Iranian facilities if the key energy transit route through the Strait of Hormuz remains closed. He followed it up later with another that read: “Tuesday, 8:00 PM ET!” without further explanation.
The president’s comments come as OPEC+ has warned that the damage to Mideast energy supplies will have a long-lasting effect on oil supplies even after the war ends. However there are few signs of progress in the ceasefire as attacks continue to erupt around the region, keeping oil prices above $100 a barrel.
“The prediction game is still tricky for investors,” said Homin Lee, strategist at Lombard Odier in Singapore. “Investors will focus more on the military actions on both sides of the Persian Gulf and whether the crossing of the Strait of Hormuz can improve even more despite these attacks.”
The fallout from the war has quickly clouded the economic outlook by threatening to cool growth and raise already high inflation, betting on whether the Federal Reserve will begin cutting interest rates later this year. Attention remains tight on energy prices and the closure of the Strait of Hormuz – a vital waterway for oil flows from the Middle East.
Consumers will watch the impact of the increase in crude oil when monthly US inflation data is released Friday. A nearly $1-per-gallon increase in U.S. gasoline pump prices likely lifted consumer prices in March by 1%, the most since post-pandemic inflation in 2022, according to an economic survey ahead of the report’s release.
What Bloomberg strategists are saying…
Global investors will remain on the defensive as President Donald Trump issues threats to destroy Iran’s power plants. The report of stocks and weak bonds, among the strong dollar is set to exist when traders see the war in Iran in the form of rising without an immediate sign of a down-ramp.
– Mark Cranfield. MLIV. For the full review, click here.
The S&P 500 is coming off its biggest weekly gain of the year, jumping 3.4% fueled by short-covering and speculation early in the week that Trump was ready to launch a US military crackdown. The gains left the index just 5.7% below its January record.
But on Thursday, the last trading day of a holiday-shortened week, US stocks opened lower after Trump’s televised address dashed hopes that he would set out a firm timetable for ending the war. Equities later suffered losses on reports that Iran was negotiating with Oman on ways to deal with shipping traffic through Hormuz.
However, West Texas Intermediate crude finished above $110, up 11% Thursday, while global Brent crude settled near $109. Meanwhile, OPEC+ has warned that the damage to Middle East energy supplies will have a long-term effect on oil supply even after the Iran war ends, as it has accepted a symbolic increase in production estimates for next month.
Meanwhile, on Friday, US Dollars fell after a stronger-than-expected reading in March employment prompted investors to pay for Fed rate cuts. That marked a change from last week’s highs, when bonds were found as attention shifted from energy price inflation to estimates that rising costs for consumers and businesses will slow the pace of growth.
The yield on two-year Treasuries rose four basis points to 3.84%. The US added 178,000 jobs last month, higher than all estimates in a Bloomberg survey.
“This makes it less likely that inflation will be pushed to ‘bad news’ driven by labor shortages,” Krishna Guha, head of central bank strategy at Evercore ISI, wrote in a note. “The fall in pre-war unemployment increases the risk of a Fed hike, but we still think this is unlikely in 2026.”
Meanwhile, continued attacks by the Islamic Republic destroyed Kuwait’s oil headquarters and shut down an Emirati petrochemicals plant. Fifteen ships have passed through the Strait of Hormuz with permission from Iran, the Fars news agency reported, citing the latest information on the difficult traffic.
Trump has previously walked back his threats to hike, including two weeks ago before markets reopened for the week. Trump also said he plans to hold a press conference at 1pm in New York on Monday.
“Trump is probably serious about his desire to resign in another two or three weeks,” Lombard Odier’s Lee said. But the clear trend of leaning towards the conflict suggests that his efforts to carry out a final series of aggressive strikes could have a positive effect on the markets.
Business Information:
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Hon Hai Precision Industry Co. reported a 29.7% increase in quarterly sales, an indication of steady demand for AI during the first weeks of the war in the Middle East.
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Deutsche Lufthansa AG sees potential problems for the availability of jet fuel if the conflict in the Middle East turns into a protracted war.
Some of the main movements in the markets:
Stocks
Finances
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.1514
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The Japanese yen was little changed at 159.66 per dollar
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The foreign yuan was little changed at 6.8868 per dollar
Financial statements
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Bitcoin rose 1.1% to $68,363.63
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Ether rose 0.8% to $2,084.8
Goods
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West Texas Intermediate crude rose 1.5% to $113.18 a barrel
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Spot gold was down 0.9% at $4,634.29 an ounce
This story was produced with the help of Bloomberg Automation.
–Courtesy of Chris Nagi.
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