Brent was headed for its biggest ever monthly rise on Monday as it crossed $116 per barrel, while U.S. crude rose to more than $102 per barrel. Both have since fallen back slightly, but remain elevated. The moves follow sharp upticks for the benchmarks last Friday.
More worrying for energy consumers - and central bankers - is that 3-month Brent futures are also now above $100 per barrel, indicating growing pessimism about a near-term end to the war and the growing risk of a persistent inflationary bump.
Taking their cue from the renewed rise in crude prices, Asian stocks tumbled on Monday. Japan’s Nikkei fell by 2.8%, bringing its March losses to nearly 13%, while South Korea’s KOSPI index fell by nearly 3%, down almost 9% this month.
Nevertheless, European shares rose slightly in early trading and Wall Street futures were up before the bell, perhaps soothed by Trump's comments on apparent talks with Tehran.
Meantime, the dollar held firm as it stayed on track for its biggest monthly gain since last July. The greenback’s strength helped push the yen past the 160-per-dollar level - typically seen as a red line for intervention. Japanese currency official Atsushi Mimura said on Monday that “decisive measures” may be called for to stem the yen’s fall.
As the energy shock continues, G7 finance ministers, foreign ministers and central bankers are due to meet virtually today to assess what they can do to alleviate its impacts.
Traders may also get some timely Federal Reserve commentary on the unfolding situation as both Fed Chair Jerome Powell and New York Fed President John Williams are set to speak today.
And we’ll also get a look at the energy shock’s initial pass-through into European inflation with the release of German CPI figures for March.
Meantime, Pakistan, which has emerged as a crucial intermediary in the Middle East conflict, has said it is preparing to host “meaningful talks” between Tehran and Washington - though it’s unclear whether either side has agreed to attend.
With more U.S. troops deploying to the region and reports of ground operations swirling, the crisis seems to be at an important juncture. Whether all this noise ultimately leads to escalation or de-escalation remains to be seen.
