A Strait of Hormuz skirmish wiped out a week of peace-deal optimism in hours
A month-long ceasefire nearly collapsed Thursday after the US and Iran exchanged fire in the Strait of Hormuz sending crude prices surging again after a week of cautious optimism that a deal was within reach.
Brent crude futures jumped 2.26 percent to US$102.32 a barrel on Friday morning, according to CNBC, reversing three straight days of declines and snapping a weekly slide of roughly 6 percent for both Brent and West Texas Intermediate.
Reuters reports the renewed fighting came as Washington was still awaiting Tehran's response to the latest US peace proposal — one that left unresolved the core demands around Iran's nuclear programme and the strait's full reopening.
Iran's military accused the US of targeting an Iranian oil tanker and another vessel entering the strait.
The US military countered that it acted in self-defence after Iranian forces fired on navy destroyers transiting the waterway.
Trump, in a call with ABC News, insisted the ceasefire remained in effect and called the exchanges "just a love tap," though he warned Iran would face further strikes if it failed to sign a nuclear deal, CNBC reported.
The exchange of fire ended what had briefly looked like a breakthrough.
Earlier Thursday, Brent had plunged toward US$96 after Pakistan's foreign ministry spokesperson — Pakistan has been mediating the talks — said "we expect an agreement sooner rather than later," according to BNN Bloomberg.
But Brent erased most of that drop and briefly topped US$102 before settling at US$100.06, down 1.2 percent on the day.
CNBC said Trump later paused "Operation Freedom," the US naval mission escorting commercial vessels through the strait.
ANZ Research warned that "the risk of a proposed US peace deal breaking down will likely keep oil markets volatile," while Citi analysts cautioned the path to normalization is unlikely to be smooth and could keep oil prices elevated for months.
The volatility hit Wall Street directly.
The S&P 500 fell 0.4 percent from its record set the day prior, closing at 7,337.11, while the Dow dropped 313.62 points to 49,596.97, BNN Bloomberg reported.
The 10-year Treasury yield edged up to 4.38 percent from 4.36 percent — still well above the 3.97 percent level that prevailed before the war began — as higher borrowing costs continued to weigh on equities.
Corporate earnings softened the blow.
According to BNN Bloomberg, Datadog surged 31.3 percent after beating analyst profit estimates, while Axon Enterprise gained 10.6 percent on strong counter-drone product growth.
On the losing end, Shake Shack dropped 28.3 percent on a weak quarter, and Whirlpool tumbled 11.9 percent as it announced its largest North American appliance price increases in a decade amid softening consumer confidence.
Separately, the US Commodity Futures Trading Commission is investigating US$7bn in oil trades placed ahead of key Trump announcements on the war, Reuters reported.
Most involved short positions on the Intercontinental Exchange and Chicago Mercantile Exchange placed before Trump's statements on ceasefire or delayed attacks — each of which caused prices to fall.
Currency markets also reflected the tension.
Reuters reported that the yen traded at 156.88 per dollar, struggling to break past 155 despite data suggesting Japanese authorities may have sold as much as US$67bn in its defence.
