From New York to Tokyo, equities retreat on renewed US-Iran tensions

Global equities fell and oil prices rose after Donald Trump signalled the ceasefire with Iran may be be over, reviving concerns over inflation and interest rates

A flare-up in geopolitical risks drove stocks lower, bond yields higher and oil prices up after US President Donald Trump said the ceasefire with Iran may be over, adding that the US would probably launch further strikes.

 

From New York to London and Tokyo, equities retreated. Almost 400 shares in the S&P 500 declined, though chipmakers bucked the trend. The renewed hostilities threatened a fresh wave of disruption to energy markets, stoking inflation concerns, with money markets increasing their bets that the Federal Reserve will raise interest rates by October.

 

“We hit them very hard last night,” Trump said on Wednesday on the sidelines of the North Atlantic Treaty Organization (Nato) summit in Ankara, Turkey. “Probably hit them hard again tonight,” he said.

 

 

“Markets weren’t initially taking the re-escalation in US-Iran tensions too seriously earlier this week,” said Fawad Razaqzada at Forex.com. “But today, that seems to have changed,” he added.

 

Veteran strategist Ed Yardeni said the collapse of the ceasefire between the US and Iran risked triggering a fresh acceleration in inflation, which in turn could compel the Fed to raise interest rates.

 

“Inflation concerns are back in play and, as a result of that, the Fed is back in play,” Yardeni said.