Escalating tensions after oil tankers were directly targeted in the Middle East increased concerns that the conflicts could intensify further. As risks to energy supplies grew, risk perceptions rose in global markets.
U.S. Secretary of State Marco Rubio said Iran would pay an economic price if it continued firing on U.S. warships. Rubio said four tankers had been damaged and one had sunk, adding that economic pressure on Iran would continue.
The Islamic Revolutionary Guard Corps said two U.S. Navy warships had been targeted with ballistic missiles in retaliation for U.S. attacks on Iranian oil tankers.
Energy prices and bond yields rise
Following the developments, Brent crude rose above $100 a barrel again after nearly two months. November Brent futures rose 3.4% the previous day to $101.20 before stabilizing at $101.10 in the new trading session.
Rising oil prices increased inflation concerns, while bond yields also climbed. The yield on the U.S. 10-year Treasury note approached 4.86%, reaching its highest level since November 2023, while the 30-year yield rose as high as 5.31%.
The U.S. Treasury Department announced that it would buy back up to $6 billion of Treasury securities with maturities of 10 to 20 years today to support liquidity in the long-term bond market. However, the announcement failed to curb the rise in bond yields as markets had expected a larger operation.
The rise in oil prices and bond yields ahead of the release of U.S. producer and consumer inflation data made it more difficult for investors to make decisions. The data could affect expectations regarding the Federal Reserve’s policy steps in the coming period.
U.S. and European stocks decline
Rising geopolitical risks and higher energy costs weakened the artificial intelligence optimism that had supported technology stocks since the start of the week. The S&P 500 fell 0.48%, the Nasdaq declined 0.64% and the Dow Jones dropped 0.77%.
U.S. President Donald Trump argued in a speech at the Republican National Convention that they had won the war involving Iran. Trump said they had entered the war to prevent Iran from acquiring a nuclear weapon, adding that oil prices would fall once the war was won and that they controlled trade in the Strait of Hormuz.
European stock markets also followed a predominantly negative trend. The FTSE 100 fell 1.31% in the United Kingdom, the FTSE MIB 30 declined 0.58% in Italy, the CAC 40 dropped 1.94% in France and the DAX 40 fell 1.66% in Germany.
The European Central Bank was expected to raise its three key interest rates by 25 basis points each, while the possibility of an additional increase by the end of the year was also priced in. ECB President Lagarde said the political and economic divisions among European countries weakened their global influence.
The European Commission also announced a proposal to facilitate prioritizing European companies and products in the public procurement market, worth approximately €2.6 trillion. The euro/dollar exchange rate rose 0.1% to 1.1640.
Asian markets also come under selling pressure
The negative trend in U.S. and European markets spread to Asian stock markets as well. Rising energy costs increased concerns over persistent inflation, while higher bond yields created selling pressure across regional markets.
Japan’s 10-year bond yield held at 2.93%, while the dollar/yen exchange rate fell 0.1% to 153.4. Kazuyuki Masu, a member of the Bank of Japan, said oil prices and a weak yen were increasing inflation risks, signaling support for a rate hike.
Near the close, the Nikkei 225 fell 0.4%, the Kospi declined 0.2%, the Hang Seng dropped 1.5% and the Shanghai Composite fell 0.4%.
Borsa Istanbul records all-time high trading volume
The BIST 100 index on Borsa Istanbul gained 0.70% to close at 14,505.48 points. Trading volume in the index reached 328.6 billion liras, its highest level on record.
The October contract based on the BIST 30 index on the Borsa Istanbul Futures and Options Market traded flat in the evening session compared with the regular-session close. The focus of domestic markets is on the interest-rate decision of the Central Bank of the Republic of Türkiye.
Economists expect the policy rate to remain unchanged at 37%. The median year-end policy rate forecast was calculated at 35%.
The dollar/Turkish lira exchange rate closed the previous day at 48.4820. The exchange rate traded at 48.4940 in the interbank market during the new trading session.
Analysts are watching 14,600 and 14,700 points as resistance levels and 14,400 and 14,300 points as support levels for the BIST 100 index. Markets will follow Türkiye’s industrial production data and interest-rate decision, the ECB’s interest-rate decision, and the U.S. producer inflation data and weekly jobless claims.
