Key facts
- Oil prices surged as much as 6% to a two-week high following President Donald Trump's declaration that the Iran ceasefire is over.
- The US military struck over 80 targets in Iran in response to attacks on commercial vessels.
- The US revoked a waiver that had allowed Iran to restart oil exports.
- European and Asian stock markets declined significantly.
- Inflation-sensitive assets such as bonds and gold tumbled.
- Volatility measures for equities, bonds, and currencies increased.
Global investors received a stark reminder of oil market volatility and inflation concerns after U.S. President Donald Trump declared an interim agreement with Iran to end the war "is over." Oil prices jumped as much as 6% to a two-week high, while inflation-sensitive assets like bonds and gold tumbled. European and Asian stock markets declined.
Trump's remarks followed US military strikes on Iran in response to attacks on commercial vessels, leading to the revocation of a waiver that had allowed Iran to restart oil exports. The US Central Command struck over 80 targets in Iran. At least four oil and gas tankers reportedly turned back from attempting to transit the Strait of Hormuz.
Bond yields surged as traders raised expectations of price increases and positioned for higher interest rates. Contracts tracking euro zone CPI inflation expectations rose, and traders priced in further tightening from the European Central Bank, Federal Reserve, and Bank of England. Shorter-dated bonds were the biggest movers, with Germany and Britain's 2-year bond yields jumping 10 basis points.
Volatility, which had been largely absent, increased across equities, bonds, and currencies. Gold prices fell 1.1% on the day, pressured by dollar strength and increased bets on central bank rate hikes, despite its traditional role as a safe-haven asset and inflation hedge.