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Stocks fall as inflation fears fuelled by Middle East air war increase
Investors weighed the impact of U.S.-Israeli strikes on Iran and global economic conditions on the energy market and stock prices, and the dollar strengthened on Tuesday. MSCI's broadest?Asia-Pacific share index outside Japan dropped 1.5%, extending?losses a second time. The drop was led by as much as?4.1% in Korean shares. Tokyo's Nikkei fell 2.3%, and S&P500 e-minis futures dropped 0.6%. Rupal Agarwal is Asia Quant Strategist at Bernstein, Singapore. "Economic uncertainty was already high and with the Iran conflict the geopolitical risks are expected to increase too," she said. The last time these two factors spiked together was in 2022, during the Russia-Ukraine crisis. This didn't go well for Asian markets. Wall Street has stabilised following a volatile session Monday. The S&P 500 recovered from an initial selloff and closed flat, while the Nasdaq Composite rose 0.4% after investors bought the dip. U.S. President Donald Trump tried to justify an open-ended, broad war against Iran by saying that the campaign had exceeded expectations. An official of Iran's Revolutionary Guards announced on Monday that there is no end in sight to the hostilities and that any ship trying pass the Strait of Hormuz will be fired upon. The threat immediately impacted the hiring of a supertanker for the shipping of oil from the Middle East into China, pushing up the cost to a new record of over $400,000 aday, according to LSEG. Brent crude futures rose another 2% on Tuesday to $79.22. On the natural gas market, European and Asian benchmark LNG prices jumped by about 40% on Monday. Working through the Risk Scenarios The surge in energy costs could increase the cost of Asian companies, and impact their profits and stocks. Goldman Sachs analysts wrote in a report that a 20% increase in Brent oil could result in regional earnings falling by 2%, with large intraregional variations. However, this is dependent on the length of the conflict. They said that spikes in geopolitical risks tend to have negative effects on the short term, but they dissipate with time. The current increase in geopolitical risks coincides with a regional vulnerability to correction. Energy prices are on the rise, complicating the Federal Reserve's attempts to control inflation. Policymakers have already shown signs of division over the impact artificial intelligence will have on the U.S. Economy. Secretary of State Rubio announced on Monday that the U.S. will take steps to reduce rising energy costs due to the spike in oil prices caused by the conflict with Iran. ISM manufacturing data, released on Monday, showed that U.S. activity increased steadily in February. However, a measure of factory gate price soared to a nearly 3-1/2-year-high amid tariffs. This highlighted the upward pressure on inflation, even before U.S. led attacks on Iran. FedWatch, a tool of the CME Group, shows that Fed funds futures price an implied 97.5% chance that the U.S. Central Bank will remain on hold after its next two-day?meeting on March 18. The odds of the June hold, which were previously less than 50%, increased on Monday to?slightly more than a coin flip. The U.S. Dollar Index, which measures the strength of the greenback against a basket containing six major counterparts, was close to a six-week peak at 98.499, as the currency recovered some of its appeal as a haven. The yield of the 10-year Treasury Bond in the United States was down 1.2 basis point at 4.036%. In a recent research note, DBS analysts wrote that "current market dynamics only show a mild risk off tone. This is not enough to sustain a strong?bid for U.S. Treasury Bonds or to push the Fed to make faster cuts." They added that "the conflict raises the spectre stagflation." While energy prices are not at the same levels as they were during the beginning of the Russia-Ukraine war in 2022 investors will likely be watching closely the duration and extent to which energy supplies will be interrupted. Gold rose 0.6% to $5,358.44. Bitcoin fell 1.5% to $68,399.26 while ether dropped 1.5% to $2,013.07. (Reporting and editing by Gregor Stuart Hunter)
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Iron ore prices fluctuate as investors weigh up rising freight costs versus falling demand
Iron ore prices slid on Tuesday as investors weighed the rising freight costs caused by a widening conflict in Iran that impeded shipments through the 'Strait of Hormuz, against the falling demand due to production restrictions among Chinese steelmakers. Iranian media reported that a senior Iranian Revolutionary Guards official stated on Monday that the Strait of Hormuz was closed and Iran would fire on any ships trying to pass. This sent oil prices and shipping costs soaring. As of 0212 GMT, the most-traded contract for iron ore on China's Dalian Commodity Exchange was flat at 748.5 Yuan ($108.73). As of 0202 GMT, the benchmark April iron ore price on Singapore Exchange fell 0.41% to $98.85 per ton. Tomas Gutierrez is the head of data for Kallanish Commodities. Analysts said that rising freight costs increased the cost of iron ore, which in turn boosted ore prices. Hot metal production, which is a good indicator of iron ore consumption, will likely fall because China's annual parliament meeting begins on March 5. This should keep the price of ore from rising. Some Chinese steelmills were required to reduce output during the important meeting in order to ensure cleaner air. The port's iron ore inventory is at a record high. Also, the prices of other products have been reduced. Coking coal was down by 0.18%, while coke was up 0.03%. The benchmarks for steel on the Shanghai Futures Exchange have lost ground. Rebar and wire rod fell 0.42%. Hot-rolled coils dropped 0.4% and stainless steel lost 0.49%. $1 = 6.8840 Chinese Yuan (Reporting and editing by Amy Lv, Lewis Jackson)
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Rubio: US will act to reduce oil prices for Americans
Rubio, the Secretary of State for the United States, said that the U.S. would 'take action' to tame the rising energy prices caused by a surge in oil prices as a result of the conflict with Iran. Rubio told reporters on Capitol Hill that Treasury Secretary Scott Bessent and Energy secretary Chris Wright will announce the plans Tuesday. Rubio stated that "starting tomorrow, you'll see us roll out those phases in an effort to mitigate against this... We anticipated this could be a problem." According to his itinerary, President Donald Trump will meet Bessent and Wright on Tuesday at 2 pm (1900 GMT). Prices of oil and natural gas soared on Monday following the strikes by Israel and the United States on Iran, and the retaliation of Tehran. This led to the shutdown of oil and gas installations?across?the region and the disruption of shipping in the Strait of Hormuz. The Energy and Treasury Departments did not respond immediately to a?request for comment. Reporting by Jasper Ward and Ryan Patrick Jones; editing by Caitlin Derpinghaus and Thomas Derpinghaus
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Wildfires may force S&P to cut Berkshire's PacifiCorp utility into junk
S&P Global announced on Monday that it could downgrade PacifiCorp to junk status, as liability from class actions litigation over a number of Oregon wildfires in 2020 increases. The warning was issued after an?Oregon juror on February 25, awarded $305 Million to 16 plaintiffs or $19 Million per plaintiff. They blamed PacifiCorp of failing to shut down power lines during the Labor Day Weekend windstorm. In earlier trials, plaintiffs had received an average of $5 million. S&P stated that it may reduce PacifiCorp’s "BBB minus" credit rating - the lowest investment grade - by at least two notches if future plaintiff awards reach $19 million, and by one notch if they are "significant", but smaller. It said that it would closely monitor verdicts over the next few weeks. The James class action trial is scheduled to run until early 2028. Berkshire Hathaway energy, PacifiCorp’s parent company, said that the utility could be liable for $48 billion in potential payouts - on top of the $1 billion already received. PacifiCorp is exposed to wildfires in the amount of $50 billion. PacifiCorp, in response to S&P’s action, said that it intends to appeal the $305-million verdict and is focused "providing clarity" to employees and customers, as well as communities. PacifiCorp awaits a decision by the Oregon Court of Appeals on whether or not the class action had been properly certified, and if claimants are entitled to recover damages for emotional stress. Berkshire Hathaway Energy stated that a loss of investment-grade could cause PacifiCorp to be unable to raise funds?to fund ongoing operations. This includes paying suppliers and providing electricity to customers. The parent company added that "PacifiCorp is confident it will be able to meet its obligations and operations for at least another year." Berkshire Hathaway's credit rating is high. Greg Abel, Berkshire Hathaway's Chief Executive, said in his first annual shareholder letter on Saturday that the Omaha-based conglomerate will accept responsibility for wildfires but fight unjustified claims. "PacifiCorp should not be treated like a deep-pocket insurer," he wrote. Reporting by Jonathan Stempel, New York; Editing and proofreading by Cynthia Osterman
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Stocks fall as Middle East conflict fuels inflation fears
Investors weighed the implications of U.S., Israeli and Iranian strikes on Iran for?energy and the global economic system as they traded in the early Asian hours of Tuesday. MSCI's broadest Asia-Pacific share index outside Japan dropped 1%, extending losses for the second day. The drop was led by a 2.5% fall in Korean shares. Tokyo's Nikkei225 fell 0.8%. S&P 500 futures fell 0.2%. Rupal Agarwal, Asia quant strategy at Bernstein, Singapore, said: "Economic uncertainty was already elevated, and now with Iran conflict, geopolitical risks are expected to increase too." The last time these two factors spiked together was 2022, during the Russia-Ukraine war. This didn't go well for Asian markets. Wall Street stocks stabilized after a volatile Monday session. The S&P 500 recovered from an initial selloff and closed flat, while the Nasdaq Composite rose 0.4% as investors pounced on the market dip after the Middle East conflict spilled into Lebanon. An official of Iran's Revolutionary Guards announced on Monday that there is no end in sight to the hostilities and that the Strait of Hormuz will be closed to all marine traffic. Brent crude futures surged 13%, to $82.37 per barrel, the highest price since January 2025. They then settled up 7.1%, at $78.07. On the natural gas market, European and Asian benchmark LNG prices jumped by about 40% on Monday. Energy prices are a major factor in the Federal Reserve's struggle to control inflation. ISM manufacturing data, released on Monday, showed that activity in February grew steadily. However, a measure of prices at the factory gate soared to near 3-1/2 year highs amid tariffs. This highlighted upside risks to inflation, even before the U.S. led attack on Iran sent oil prices soaring. FedWatch, a tool of the CME Group, shows that Fed funds futures indicate 97.5% implied probability that the U.S. Central Bank will stay on hold during its next two-day?meeting?on 18 March. The odds of the June 'hold', which were previously less than 50%, increased on Monday, and are now better than a toss of a coin. The U.S. Dollar Index, which measures the strength of the greenback against a basket of six major counterparts, held at close to a six-week peak of 98.494 despite the recent 'Iran strikes' that rattled the market and gave the currency some of its appeal as a safe-haven. The yield of the 10-year Treasury Bond was down 1.9 basis point at 4.0288%. Gold rose 0.2% to $5336.99. Bitcoin fell 0.1% to $69 348.85 while Ether was up 0.3%, at $2,050.50. (Reporting from Gregor Stuart Hunter).
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McGeever: The war in Iran traps Treasuries' investors in an oil stagflationary dilemma.
U.S. Treasuries have just had their best month since last year. Investors must now decide whether the sudden outbreak of war in the Middle East will boost the bond market rally, or if a surge in oil prices will cause it to crash. The U.S. and Israeli attack on Iran, which resulted in the death of Supreme Leader Ayatollah Khamenei, on Saturday marked a dramatic 'escalation' in tensions in the region. The simmering conflict has already pushed Brent crude prices above $70 per barrel in recent weeks. It also sparked investor appetite for Treasuries, pushing the 10-year yield down to below 4%. These two moves both accelerated dramatically in the early trading of Monday. Brent oil soared by as much as 14 percent, and Brent broke through the $80/bbl mark, amid fears of disruptions in supply from one of the world's largest producing regions. The 10-year Treasury yield fell to 3.90% - its lowest level since last April. The buying frenzy cooled down, particularly at the short end, where the yield on the 2-year Treasury note flipped and traded 6 basis points higher. Bond investors face a dilemma: should they buy Treasuries as a hedge against a possible slump in risky assets due to a spike in geopolitical risks, or should they sell them in anticipation of inflation and a possible Federal Reserve response due to the soaring price of oil? Which half of "stagflation's" dynamic will win out? FLIGHT TO SAFETY Investors' first instinct was to seek cover. The allure of Treasuries, and other high-rated government bonds, seemed overwhelming as stocks fell around the globe. On Monday, the majority of Asian and European benchmark equity indexes dropped between 1% to 2%. European yields also initially declined. It's easy to understand, given the potential crushing impact of rising oil prices on economic development. Jordan Rochester, a Mizuho analyst, estimates that an increase of $10/barrel will knock 10-20 basis point off the growth rate for the next year. Oil has already risen by $20/bbl over the past six weeks and could reach $100/bbl soon. The global economy would be severely affected if crude rose above this threshold and stayed there. The "bull" case is strong for Treasuries, especially when you consider the looming threat of AI to white-collar jobs in the next few years. OIL NOW +13 % YEAR-ON-YEAR The "risk-off" trade that immediately followed the U.S. - Israel strikes sparked a flood of demand for Treasuries. However, a persistent rise in oil prices ultimately pushes all other prices higher. Analysts at Rabobank note that a significant increase in oil prices is inflationary. "Just as it was during the Russian invasion of Ukraine", they say. According to economists, a $10 increase in oil can boost the annual inflation rate by up 0.2 percentage points. This might not seem like much. The Fed's preferred annual inflation measure is already at 3%, and it is creeping up. So every increase counts. Mizuho’s Rochester said oil at $100-$130/bbl for any period of time would not just take Fed rate reductions completely off the table but also trigger a mild cycle of rate-hiking "at least". The broad-based price pressures are already pushing prices higher in the U.S. The data on producer price inflation for January, released last Friday, was hotter than anticipated. And the deflationary pressure from oil is now turning into an inflationary one. Brent crude's price increased by a positive amount last week. If this trend continues, it will mark the first time since 2024 that oil's "base effect" will exert upward pressure rather than downward on annual inflation calculations. Brent crude was nearly 30% cheaper in early January than it had been a year before. It is now 13% higher than a year ago. This is a major shift in the inflation models that will cause Fed officials to be on alert. Energy and motor fuel account for a combined weighting of more than 9% on the U.S. Consumer Price Index. $100/bbl could translate to a 0.8-1.5% rise in the CPI, if sustained and fully reflected in increased gasoline prices. It is possible that this figure could be significantly underestimated, if rising oil prices also increased housing, transportation, food, and other costs. Treasuries have fallen from the highs they reached on Monday morning. The conflict in 'the Middle East' is fluid and appears to be spreading, so sentiment can change in an instant. The jobs of Treasuries' investors just got harder. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Petrobras CEO: We do not transfer sudden volatility in oil prices to the local market
Petrobras, the state-owned oil company in Brazil, said that the conflict in Iran is putting pressure on the price of crude oil. However, the volatility does not always affect the fuel market at home, according to its CEO. The global oil price soared after Iran launched a retaliatory attack to disrupt shipping through the Strait of Hormuz following the weekend attacks by Israel and the U.S. which killed Ayatollah Khamenei, the Supreme Leader of Iran. Magda Chambriard, the Chief Executive of Petrobras, said in an exclusive interview that the company is closely monitoring the effects of the conflict on the Strait?of Hormuz. It increases oil prices for sure. But Petrobras has never been affected by sudden volatility in oil prices. Petrobras is closely monitoring the impact of the conflict in Iran, and will be watching oil prices over the next week to make decisions about fuel prices. Brent crude rose up to 13% before settling at 6.7%. This boosted the Petrobras shares, which export crude as well, by over 4%. A closure of the Strait of Hormuz could have a significant impact on global oil flows, and force a reshuffle of shipping routes. Petrobras would benefit, but might have to purchase potentially more expensive crude and derivatives in other regions. Petrobras imports crude oil daily to "blend" with its own production. Claudio Schlosser is the executive director for logistics, commercialization, and markets at Petrobras. He said that the company still has options and flexibility in order to "operate competitivly" despite the Middle East Conflict. Schlosser said that Petrobras had alternative routes outside the conflict zones, which gave us security, and cost-competitive costs for our operations. This preserved our margins. He refused to comment on the?potential change in Petrobras fuel prices. He said that most imports come from outside of the crisis area, and "the few which do exist can also be redirected." Reporting by Rodrigo Viga Gaier, Writing by Oliver Griffin, Editing by Roberto Samora Andrea Ricci Chris Reese
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Investors hope for a quick resolution to the Middle East crisis and look beyond it.
Investors have confidence to buy the dip despite the initial Middle East drama. They hope for a quick resolution of the crisis. The markets reacted with a knee-jerk reaction to the U.S. attack on Iran on Monday, but many of the initial more severe price movements moderated during the trading day. Oil prices rose but closed below session highs. Stock markets in Europe fell, but U.S. indices recovered early losses and rose by the afternoon. Jacob Taurel is the managing partner at Activest Wealth Management. He said, "The market's main scenario is that this conflict will be resolved quickly." Investors reported that the market response was muted due to the general awareness of action in Iran, which led to risk-off trading before the move. Michael O'Rourke is the chief market strategist for JonesTrading, a Stamford-based firm. Donald Trump, the U.S. president, expressed his disappointment about U.S. nuclear negotiations with Iran on Friday. "The increase in force was evident to us," stated Ali Meli, the founder and chief executive officer of Monachil Capital Partners LP. "People were hedging their bets... This is why the reaction today has been so muted." Strategists say that other factors which contributed to Monday's trading included a "buy-the-dip" mentality, the expectation that geopolitical influences on markets would fade, and a belief that the conflict will be resolved soon. The events in geopolitics that have triggered knee-jerk reactions are the Russian invasion of Ukraine in 2022, Trump's call for tariffs on a broad scale and the subsequent negotiations with each country, and this year’s intervention by the U.S. intervention in Venezuela. Morgan Stanley analyst Michael Wilson stated in a report that geopolitical events are not usually a cause of sustained volatility in equities. He added that the S&P 500 will typically rise in the months following these events. J.P. Morgan analysts said that they expect a decline of one to two weeks in the prices of riskier assets. However, this will create a "buy-the-dip" opportunity once the market has recovered from the initial drop. The major U.S. equity indices were largely muted, but there was evidence that a reaction had taken place below the surface of the market. Energy sector of the S&P 500 was up by 1.8% in afternoon trading. This reflects the increase in oil prices. Defense companies also saw their shares rise. Northrop Grumman shares and RTX gained about 5% each, while iShares U.S. Aerospace & Defense ETF grew by over 2%. Investors were concerned that rising gas prices could reduce discretionary consumer spending. TAIL RISK Given the complexity of the Islamic Republic’s ruling system, the biggest risk to markets is the incertitude over what will happen next in Iran. This complicates the future of oil prices, which have been rising for several weeks now and are dependent on what the oil-producing nations do and the effects of the passage of oil tankers through the Middle East. The implications of this for the inflation rate worldwide and the safety of bonds is huge. The market scenarios assume that the impact will be minimal, similar to the "12-Day War", which took place in Iran in June last year, and not the spike in oil in 2022 caused by Russia's invasion in Ukraine. Brent crude futures climbed as high as 13%, to $82.37 per barrel, their highest level since January 2025. They then settled at $76.74 per barrel, up $6.87 or 6.7%. This is still far below the $100 analysts believe Brent would reach in a prolonged conflict. Analysts at TS Lombard stated that they were concerned about a possible repeat of the 2022 market, when both bonds and equities plummeted as markets pondered long-term implications for energy supply. "The situation is still very fluid, but we remain committed to our original view that this is more of a squall than a full-blown oil crisis which will tip the global economy towards a sustained regime of stagflation." IS HISTORY A REPEATING FORMULA? Investors reduced their rate-cut bets at major central banks, focusing on the inflationary implications of higher oil prices. U.S. Treasury rates shot up. Mohit Kumar of Jefferies said, "We expect further market decline in the next few days." He had previously criticized last week's markets for being complacent about geopolitics. The dip is still a long way off. Analysts predict that Iran won't be able to disrupt the trade in 'the Gulf region, and its impact on oil prices is likely to be contained. Ed Yardeni of Yardeni Research in New York said: "We wouldn't surprise if any selling of the S&P 500 Monday morning turned into a rally driven by expectations that oil prices will drop once the latest Middle East conflict ends." Gold could also double on Monday. He said that bond yields could fall because of both the safe-haven market and future oil price prospects.
The US is planning to revise historic information, according to a leaked database from the Interior Department
The U.S. Interior Department officials said that a database which revealed how the Trump administration intended to revise information about key phases in American history on national 'park sites, was deliberate and the employees who released it would be held accountable.
The Washington Post first revealed an internal government database, which was posted to two public websites on Monday. It showed the extent of the Trump Administration's efforts to remove or revise information about African-American History, LGBT rights and climate change at hundreds of National Park sites.
A spokesperson for the Interior Department said, "The narrative advanced is false?and these draft deliberative documents are not a reflection of final actions taken by?the department." The National Park Service falls under the Interior Department.
Trump has targeted historical and cultural institutions, from museums to monuments and?national parks to remove what he calls "anti American" ideology.
His executive orders and declarations have led to the removal of exhibits about slavery, the restoration Confederate monuments and other actions that civil rights activists say could reverse decades' worth of progress.
The spokesperson for the Interior Department claimed that internal working documents had been?edited to misrepresent before being released. The spokesperson described the release as illegal and inappropriate, but did not specify which law was violated.
The spokesperson said that employees who manipulated internal records or?leaked to harm the Trump administration would be held accountable.
The Trump administration has taken action against those employees who have criticised its policies.
Some employees of the Federal Emergency Management Agency were placed on leave after signing an open letter against the agency's management. While some Environmental Protection Agency workers were fired for signing a letter criticizing the government's action.
(source: Reuters)