Markets experienced a significant downturn on Thursday as escalating tensions surrounding Iran heightened concerns, leading to a decline in stock prices, an increase in oil prices, and a strengthening of the U.S. dollar. This reaction followed a televised address by President Donald Trump, which left many investors seeking clearer insights into the timeline of the ongoing conflict in the Middle East.
In his address, Trump asserted that the U.S. would respond with considerable military force against Iran in the coming weeks, stating that military objectives were nearly fulfilled and that the conflict was approaching resolution.
The price for Brent crude oil for June delivery surged nearly 5%, reaching $106.16 per barrel, as investors found little comfort in Trump’s remarks. His speech did not clarify when or how the key shipping route through the Strait of Hormuz, vital for global fuel transportation, would reopen to alleviate the supply chain disruptions affecting Asia.
Jon Withaar, a senior portfolio manager at Pictet Asset Management in Singapore, commented, “This address provided no additional certainty or clarity regarding the timeline, which was what the market was hoping for.” He expressed concerns that the expectation of continued military action, including potential ground troop involvement and threats to infrastructure, would keep the market cautious, especially with an extended weekend approaching.
Previously, optimism regarding a potential resolution to the month-long U.S.-Israeli conflict with Iran had buoyed global equity markets and temporarily weakened the dollar. However, in the wake of Trump’s speech, investors returned to a selling trend across most asset classes, with the exception of the U.S. dollar, which saw gains.
U.S. stock futures dropped by 1%, while European futures fell by more than 1.5%. Asian markets faced even steeper declines, with Japan’s Nikkei index down 1.8% and South Korea’s Kospi index plummeting by 3.6%. The MSCI index for Asia-Pacific shares outside Japan also fell over 1.5%, reflecting widespread losses across nearly all Asian exchanges.
Prashan Newnaha, a senior rates strategist at TD Securities, remarked, “The critical factor remains whether the Strait of Hormuz will reopen soon. Trump’s speech does not suggest that this will occur as quickly as the markets had anticipated.” He noted that Trump claimed the U.S. does not rely on this essential oil channel, suggesting it would reopen naturally once the conflict concludes.
Iran has engaged in repeated attacks on Gulf nations, some of which host U.S. military bases, utilizing the strait as a bargaining chip in the ongoing tensions.
Newnaha added, “Trump’s remarks about the duration of previous conflicts were significant. Even if the war with Iran extends for several months, it will not last as long as earlier wars.” He predicted that both the U.S. dollar and oil prices would likely continue to rise as investors pull back from riskier assets.
The president’s statements also revived fears of stagflation—a challenging combination of high inflation and sluggish growth that troubled markets earlier in the year. The U.S. dollar emerged as a favored refuge for investors amid the turmoil, increasing in value against most other currencies post-speech. The euro dipped 0.25% to $1.156.
Following Trump’s address, the dollar index, which tracks the U.S. currency against six others, rose by 0.3% to 99.858, recovering from a near 1% decline over the past two days due to prior optimism regarding a swift end to the conflict.
