Oil jumps, stocks drop on Trump’s Hormuz threat

Oil surged while stocks and bonds fell after President Donald Trump ordered a blockade of the Strait of Hormuz, escalating tensions with Iran after weekend peace talks collapsed.

Brent crude jumped 7.4% to just above $102 a barrel on concern a blockade will disrupt energy flows through the key waterway. Asian shares dropped 1%, while S&P 500 Index futures fell 0.8% as higher oil prices threatened to weigh on economic growth. Tech companies such as Taiwan’s MediaTek Inc. showed resilience, supported by robust sales. European shares were primed to drop 1.5% at the open.

The dollar, which has been the haven of choice since the Middle East conflict began, strengthened against all its Group-of-10 peers. Treasuries fell and Japan’s 10-year yield rose to 2.49%, the highest since 1997 on concern higher energy prices will push up inflation.

Trump’s threats of escalation dented sentiment after global stocks posted their biggest weekly gain in more than two years, and Brent had its steepest weekly drop since 2022. Even so, Monday’s relatively modest pullback after the failure of talks suggests investors retain some guarded optimism that a resolution can still be reached and limit the broader impact of the conflict.

“After an initial knee-jerk reaction to weekend headlines, market sentiment has steadied somewhat, but remains cautiously resilient,” Dilin Wu, a strategist at Pepperstone, wrote in a note. “Traders are now focused on whether diplomatic channels can be extended, though no clear progress signals have emerged so far.”

The US will begin implementing a blockade of all maritime traffic entering and leaving Iranian ports on Monday at 10 a.m. New York time, the US Central Command said, following up on Trump’s announcement. US forces won’t impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports. Iran said it “won’t allow” the blockade to go ahead.

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Trump said the US will interdict any vessel that has paid a toll to Iran for safe passage through Hormuz and will clear mines in the strait. A blockade would halt the nearly two million barrels a day of Iranian oil that’s been passing through the waterway, further squeezing global supply and cutting off a vital lifeline for the Islamic Republic.

“The hardest part of trading this event is that the fog of war has truly kicked in,” Jordan Rochester, head of fixed income, currencies and commodities strategy at Mizuho Bank in London, wrote in a note. “It’s hard to trust what we’re reading. We get extremely contradictory news flow within minutes and hours of each other.”

Elsewhere, Hungary’s currency gained versus the euro and the dollar after Prime Minister Viktor Orban was ousted in a landslide victory for the pro-European opposition in Sunday’s election. The result is seen as the most bullish outcome, as it would help unblock access to billions of euros in European Union financing.

European natural gas prices surged in early Asia trading on Monday. Dutch Title Transfer Facility futures jumped as much as 18% to €51.30 a megawatt-hour.

Gold slipped 0.7% to about $4 720 an ounce as higher oil prices fueled expectations interest rates will stay elevated, weighing on non-yielding assets such as bullion. Bitcoin edged lower to about $71 000.

Gauging how markets will react to headlines from the Middle East has been a fraught process since the conflict erupted at the end of February. Some analysts said the scale of market reaction may be limited if investors take the view that the talks represent a negotiating tactic that will eventually lead to a solution for the seven-week conflict.

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“It was already somewhat anticipated in the market that the weekend negotiations would not be entirely optimistic,” said Hiroshi Matsumoto, a senior client portfolio manager at Pictet Asset Management Japan Ltd. “Limited downside today suggests that there weren’t that many participants who had built up long positions last week following the ceasefire.”

Adding to the potential for turbulence, first-quarter earnings season is about to start in the US, with analysts projecting S&P 500 profits will rise about 12% from a year earlier, the weakest since the second quarter of 2025. Goldman Sachs Group Inc. kicks off the US reporting season on Monday.

Investors are eager to hear what corporate leaders have to say about the mounting risks, which include hotter inflation as a result of the surge in oil, and the threat that consumers start to pull back amid the fluctuations in markets.

“The market is getting used to wild swings in headline directions,” said Fabien Yip, a market analyst at IG International. “It’s unlikely for the indices to test recent troughs again at this juncture, but things could turn much worse if Iran retaliates and US resumes previous plan of wiping out Iran’s civilization.”

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.8% as of 12:41 p.m. Tokyo time
Nikkei 225 futures (OSE) fell 0.8%
Japan’s Topix fell 0.6%
Australia’s S&P/ASX 200 fell 0.5%
Hong Kong’s Hang Seng fell 1.3%
The Shanghai Composite fell 0.2%
Euro Stoxx 50 futures fell 1.4%

Currencies

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The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.3% to $1.1688
The Japanese yen fell 0.3% to 159.72 per dollar
The offshore yuan was little changed at 6.8314 per dollar

Cryptocurrencies

Bitcoin fell 0.5% to $70,985.16
Ether fell 0.9% to $2,193.16

Bonds

The yield on 10-year Treasuries advanced three basis points to 4.35%
Japan’s 10-year yield advanced four basis points to 2.470%
Australia’s 10-year yield advanced five basis points to 5.02%

Commodities

West Texas Intermediate crude rose 8.8% to $105.02 a barrel
Spot gold fell 0.6% to $4,721.59 an ounce

This story was produced with the assistance of Bloomberg Automation.

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