Oil prices rose as tensions between the US and Iran weighed on risk appetite in global markets. The absence of any significant development pointing to an end to tensions in the Middle East prompted investors to move away from riskier assets.
A senior Iranian official allegedly said that the country could shift from a defense-focused policy to an offense-focused one if diplomatic efforts failed. In remarks at the Oval Office, US President Donald Trump answered “No” when asked whether the 60-day framework agreement, whose term had expired, would be extended.
Trump also allegedly said that the US would bomb Oman if it obstructed American operations in the Strait of Hormuz, where tensions with Iran continue. The statements heightened concerns about the impact of regional tensions on energy supplies and global investment conditions.
Oil prices and bond yields rise
Following the developments, October-dated Brent crude rose 0.6% to $91.40 a barrel. The rise in oil prices increased inflationary pressures and also created selling pressure in the bond market.
The yield on the US 10-year Treasury note rose 6 basis points to 4.73% after falling as low as 4.67% the previous day, and settled at 4.74% today. The yield on the US 30-year Treasury bond reached 5.32%, its highest level since 2007.
Demand for safe-haven assets increased amid geopolitical risks, while the dollar index rose 0.1% to 99.7. Gold fell 0.5% to trade at $4,394 an ounce.
New York stocks decline
The manufacturing index released by the Federal Reserve Bank of New York rose to 20.6 in August, reaching its highest level in more than four years. The index came in above market expectations.
US chipmaker Nvidia announced that it would invest $1.5 billion in SB Energy under an agreement related to the artificial intelligence factory that OpenAI plans to establish in Ohio. Nvidia shares nevertheless fell 0.9% in after-hours trading.
On the New York Stock Exchange, the Dow Jones index fell 0.51%, the S&P 500 declined 0.52% and the Nasdaq dropped 0.32%. US index futures also opened lower.
Selling pressure in European and Asian markets
European stocks traded mostly lower because of rising energy prices and geopolitical tensions. The FTSE 100 in the UK fell 0.28%, France’s CAC 40 declined 0.66% and Germany’s DAX 40 dropped 0.38%, while Italy’s FTSE MIB 30 edged up 0.01%. European index futures also opened lower.
Selling pressure deepened in Asian markets amid geopolitical risks and rising bond yields. Japan’s 10-year government bond yield reached 2.94%, its highest level since 1996.
Near the close, Japan’s Nikkei 225 fell 1.9%, South Korea’s Kospi declined 0.9%, China’s Shanghai Composite dropped 0.4% and Hong Kong’s Hang Seng fell 0.7%.
Borsa Istanbul ends the day lower
The BIST 100 index at Borsa Istanbul ended the session down 0.28% at 14,132.06 points after trading under selling pressure. The August futures contract based on the BIST 30 index also fell 0.03% in the evening session compared with the regular-session close.
The dollar/Turkish lira exchange rate ended the previous day up 0.1% at 47.9150 and traded at 47.9200 at the opening of the interbank market.
Domestically, Turkey’s July house price index will be monitored, while abroad, Germany’s and the euro area’s August ZEW economic sentiment indexes and US industrial production for July will be among the main data releases. In the BIST 100 index, 14,000 and 13,900 points stand out as support levels, while 14,300 and 14,400 are seen as resistance levels.
Economic data to watch
- 10:00 — Turkey’s July house price index
- 12:00 — Germany’s and the euro area’s August ZEW economic sentiment indexes
- 15:30 — US July housing starts and building permits
- 16:15 — US July industrial production and capacity utilization
- 17:00 — US July pending home sales
